Brexit remains a key uncertainty for UK assets, whilst the Italian budget is also important in Europe, and developments in the US/China remain crucial for risk appetite. We take a look at the implications that these factors are all having on forex, equities and commodities markets.

1. Weekly Outlook
Monday 19th November 2018 by Richard Perry, Market Analyst
Forex and CFDs are high risk leveraged products that can result in losses greater than your initial deposit and you should
therefore only speculate with money you can afford to lose. FX and CFD trading are not suitable for everyone. Please
ensure you fully understand the risks involved, seeking independent advice if necessary prior to entering into such
transactions. You should first carefully consider your investment objectives, level of experience, and risk appetite and only
invest funds you are prepared to lose entirely. For our full risk warning, please go to the end of this report.
Key Economic Events
WHEN: Wednesday 14th November, 1330GMT
LAST: Core (ex-transport) 0.0%
FORECAST: Core (ex-transport) +0.2%
Impact: With concerns of slowing global growth, traders
look to the US for good news. So far, with Trump’s tax cuts,
US growth trends remain strong, but are there signs of a
slowdown? The purchase big ticket durable goods could be
a lead indicator. Recent months have been fairly subdued
on each of the past three months not only have they been
weaker than expected but also revised lower. Last month
was revised to zero growth. Is this a sign of slowing growth?
Forecasts range between +0.2% to +0.5% but if the trend of
disappointment continues there would be negative Durable
Goods. US Treasury yields will be receptive and the dollar.
Date Time Country Indicator Consensus Last
Tue 20th Nov 1330GMT US Building Permits / Housing Starts (Oct) 1.27m / 1.24m 1.24m / 1.20m
Wed 21st Nov 0930GMT UK UK Public Sector Borrowing (Oct) +£6.25m +£4.12m
Wed 21st Nov 1330GMT US Durable Goods Orders (core MoM Oct) +0.2% +0.0%
Wed 21st Nov 1500GMT US Existing Home Sales (Oct) +5.7% / +9.1% / +5.5% +5.8% / +9.2% / +5.4%
Wed 21st Nov 1500GMT US Michigan Sentiment (revised Nov) 98.3 98.3 flash / 98.6 Oct final
Wed 21st Nov 2330GMT Japan CPI (core) +1.0% +1.0%
Thu 22nd Nov 1230GMT Eurozone ECB meeting accounts
Thu 22nd Nov 1500GMT Eurozone Consumer Confidence -3.0 -2.7
Fri 23rd Nov 0900GMT Eurozone Flash PMIs (Manufacturing / Services / Comp) 52.0 / 53.5 / 53.0 52.1 / 53.3 / 52.7
Fri 23rd Nov 1445GMT US Flash PMIs (Manufacturing / Services) 56.0 / 54.8 55.9 / 54.7
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1N.B. Please note all times are British Summer Time (BST) i.e. GMT +1. Data: Reuters
Macro Commentary
The political situation in the UK is febrile. Following Theresa May’s announcement of a proposed Withdrawal
Agreement, the governing Conservative Party is imploding. Brexit is a terrible mess and political risk is growing. It is
now all about the arithmetic. Hard-line Brexiteer MPs are unhappy with Mrs May’s deal, believing the UK will be too
tied to the EU after the UK leaves on 29th March 2019. Subsequently a Conservative leadership contest appears
imminent, driven by just 15% of Tory MPs willing to oppose their leader in writing (ie. 48 MPs). However Theresa
May is a significantly resilient leader and will fight any leadership contest. To win she would need to 158 of the 316
Conservative MPs. With c. 60/80 Brexiteer MPs against her so it would need a considerable number of moderates
to lose faith for her to lose a simple majority (although suggestion is that if she lost over 100 MPs it could make her
position untenable). It is therefore likely that Mrs May would win a leadership contest which could ironically bolster
her position as leader, meaning no further contest for another 12 months. However, the arithmetic then turns to the
even more difficult with the task of getting her (apparently unpopular) deal through Parliament. For this she would
need considerable support from opposition parties, again extremely difficult. A loss could lead to a Parliamentary
vote of no confidence. It seems the UK is on track to another General Election. Uncertainty is huge, sterling moves
reflect this. As options volatility spikes higher, expect a rough ride trading sterling, with further weakness the risk.
Must Watch for: US Durable Goods Orders
US Durable Goods Orders
Core Durable Goods Orders have been below expectation and
revised lower for the past few months.

2. Weekly Outlook
Monday 19th November 2018 by Richard Perry, Market Analyst
Foreign Exchange
Sterling bulls would love Theresa May’s Brexit deal to be ratified and the UK leave the EU at the end of March
in an orderly fashion. A transition period would kick in during which the UK would remain closely aligned to the
EU (although some closer than others). The crux of it is that the deal on offer is a soft form of Brexit. Sterling
has been positive as potential for a softer deal has materialised. However the arithmetic in Parliament does not
look as though the deal will be passed. This leaves huge uncertainties over the path ahead with a general
election (possible Corbyn Labour win) and perhaps even an accidental no deal hard Brexit could be seen, This
is why sterling is going to be under pressure over the coming weeks and is now set to underperform major
currencies. The euro is not immune as a hard Brexit would also be economically negative for the EU. With the
EU battling Italy over a provocative budget, the euro is also likely to struggle for any sustained outperformance.
The dollar has been strong with the US economic outperformance, Fed tightening and the US/China trade
dispute. However, with inflation still seemingly underwhelming (as per recent core CPI) can the yield curve
steepen? Remaining long the dollar (a crowded trade admittedly) is still likely to be fruitful (despite a dovish
FOMC’s Clarida), but with rhetoric improving on the trade dispute, can this continue beyond Q1 2019? As for
the US/China trade dispute improving, also watch out for the Aussie and the Kiwi sustainably performing well.
WATCH FOR: UK Brexit politics for GBP, rhetoric on trade dispute for USD, AUD and NZD.
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2
FX Outlook
GBP/USD
Watch for: Brexit remains a key driver with
elevated volatility on increased political risk
Outlook: An increasingly volatile period for
sterling as Brexit politics has become the be all
and end all. How the next few weeks pans out
could be key for the outlook over the medium to
longer term. Cable is now trading towards the
bottom of a multi-month trading range
$1.2660/$1.3300 and there is a negative bias on
momentum indicators. On a day to day basis,
calling sterling is a very difficult task but pressure
on $1.2660 seems to be growing. A breach
opens $1.2335 and $1.2100 as subsequent key
levels. Technically there is a pivot band
$1.3000/$1.3060 as resistance with $1.3175
key.
EUR/USD
Watch for: A closing break above $1.1500
would see the bulls back I the driving seat.
Outlook: The rebound that took off on Friday
now brings the pair to a test of the eight week
downtrend channel and the resistance around
$1.1430. This is a key medium term test of the
bear control now. If there were to be a move
above $1.1500 this week it would confirm the
return of the bulls, but in the meantime watching
the momentum indicators could be a lead
indicator. The RSI is at 50 whilst the MACD lines
have crossed higher, and if these begin to find
some upside traction then the outlook will begin
to improve. The old floor at $1.1300 will be seen
as a key level again too for the bulls to hold on
to.

3. Weekly Outlook
Monday 19th November 2018 by Richard Perry, Market Analyst
Equity Markets
European equity markets tried to build a recovery in late October, but that rebound has lost its way. Even as the
trade dispute between the US and China has shown signs of improving in recent weeks (which should be
equities positive), European equities remain under pressure. For the FTSE 100 there is a mix of performance
regarding Brexit developments. Although sterling weakness is positive with 70% of FTSE 100 earnings
generated overseas, certain sectors are hugely pressured in the event of either a no deal (housebuilders and
financials) of the increased prospect of a Labour government (utilities). The STOXX 600 and the export heavy
German DAX are also not immune to Brexit. In a slide towards a no deal Brexit, supply lines are impacted and
economic activity of a major trading partner is also compromised. Add in the fact that Euro/Sterling would likely
be north of £0.9000 this plays into further negatives. The DAX is trending lower, posting lower highs and lower
lows as traders continue to sell into strength. Unless there is material traction towards an agreement between
the US and China over the trade dispute, then the DAX is likely to retreat (perhaps gradually) towards a test of
the October low at 11,051 again. FTSE 100 is also on a net negative drift, although the selling pressure seems to
be less pronounced (there are winners as well as losers in a hard Brexit scenario). Trading below 7000 would
increase the corrective outlook and a retest of 6850 and the October low would be likely. However, there is likely
to be elevated volatility in a no confidence vote on Theresa May, but the real selling pressure may well be
reserved for the weeks to come should the situation deteriorate further.
WATCH FOR: Brexit politics and a vote of confidence in Mrs May’s leadership impacting FTSE and DAX.
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3
DAX Xetra
Watch for: Continued trading below 11,400
would suggest pressure towards the October low
at 11,051.
Outlook: The DAX is trending lower still, butt
here is a lack of conviction in the sell-off.
Momentum indicators are negatively configured
and continue to suggest that selling into strength
remains the viable strategy, but the intraday
volatility makes DAX a difficult trade right now.
The wide intraday ranges with long tailed
candlesticks are a testament to that. There is
though a continued negative configuration with
resistance under the trendline at 11,570 early
this week, whilst lower highs and lower lows
continue and a retest of 11,051 still seems on.
FTSE 100
Watch for: Momentum indicators remain
negative as selling into strength continues
Outlook: The FTSE 100 is drifting lower but
without any conviction in a sell-off. The
uncertainties of Brexit, with its winners and
losers across the 100 index constituents means
that intraday volatility is elevated. Just look at the
recent long upper and lower candlestick
shadows, whilst small real bodies have formed.
However, momentum indicators are negatively
configured on a medium term basis and points
towards selling into strength, meaning that a
move back towards a test of the October low at
6851 is still the risk. A close above 7114 (an old
pivot level) would improve the outlook but the
bears would still control the outlook until a move
above 7220.
Index Outlook

4. Weekly Outlook
Monday 19th November 2018 by Richard Perry, Market Analyst
Other Assets: Commodities & Bonds
Gold has had mixed fortunes recently but there are several factors driving this. Dollar strength remains key on
gold and whilst the improvement in rhetoric on the US/China trade dispute is risk positive, the key move would
be dollar corrective. The disappointment on US inflation is gold negative, but the political risk in Europe (Brexit
and Italy) is gold positive. Newsflow in these key issues will be important for gold in the coming days. The
Gold/Silver ratio has jumped back in gold’s favour in recent weeks, but remains stretched and ripe for mean
reversion.
Oil traders seem to have stemmed the tide of selling pressure, but the fundamentals of supply and demand are
key now. It would seem that US production is on the way towards 12m barrels per day (currently around 11.6m)
at some time in the coming months, whilst OPEC tried to pre-empt the US sanctions on Iran by increasing
production. There needs to be a production cut of possibly 1.5m barrels announced by OPEC, so everyone is
looking towards the bi-annual meeting on 6th December for action.
It is worth watching Italian BTP bond yields once again this week and spreads over German Bunds as the EU
moves towards disciplining Italy over its budget. Also watch for UK yields as well on Brexit, could it be that Gilt
yields start to rise as the prospect of a Labour government starts to be factored in?
WATCH FOR: Trade dispute developments, EU/Italy developments, Brexit domestic UK developments
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4
Gold
Watch for: An uptrend channel is now re-
affirmed above $1217
Outlook: The reasons to buy gold are still in the
balance, but there was a tipping of that balance
on Friday (dovish rhetoric from FOMC’s Clarida)
which drove the market back above $1217. This
has now confirmed the uptrend channel and a
move towards a retest of the $1236 long term
pivot could now be seen this week. Momentum
indicators have swung back positively again and
the old pivot range $1208/$1217 is once more a
basis of support. It will need to have a
considerable effort to drive the market through
$1236 resistance which has been a key ceiling
for months. A breakout opens $1266 whilst a
strong support is now in at $1196.
Markets Outlook
Brent Crude oil
Watch for: Bouncing from $64.60 an unwind
towards $70 is likely.
Outlook: The rot has been stopped and oil
seems to be recovering. There is now the
prospect of decisive reversal signals coming
through. The RSI crossing back above 30 is a
basic buy signal but also significant as it is the
first. A bull cross on Stochastics and MACD lines
would also confirm. There is plenty of room still
for a recovery back towards the overhead supply
above $70. This would also unwind the market
back to the downtrend resistance. Whether this
is still just a bear market rally (likely) or
something more considerable (would need a
drastic production cut by OPEC) is yet to be
known. But for now a recovery is on.

5. Weekly Outlook
Monday 19th November 2018 by Richard Perry, Market Analyst
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5
Risk Warning for Financial Promotions
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independent advice if necessary prior to entering into such transactions. Before deciding to enter into FX, Bullion and/or
CFD trading, you should carefully consider your investment objectives, level of experience, and risk appetite. You should
only invest in FX, Bullion and/or CFD trading with funds you are prepared to lose entirely. Therefore, only your excess
funds should be placed at risk and anyone who does not have such excess funds should completely refrain from engaging
in FX and/or CFD trading. Do not rely on past performance figures. If you are in any doubt, please seek further
independent advice.
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