High Impact Events Trading... Gold & Copper

Thanks for your offer! It will be awhile but I look forward to getting there before too long. Your Croatia/Swiss combo sounds ideal. I visited Switzerland a couple years back and loved it. The Jungfreau region is nothing short of amazing!

Excellent write up! That's an astute insight about the Boeing 737.

China PMI data - September Preview

1. Manufacturing PMI
2. Non-Manufacturing PMI
3. Caixin Manufacturing PMI

Quick Points

1. Impact is usually diminished when released on a Sunday night (GMT -5).
2. The first Manufacturing PMI data issued by Markit has the greatest potential for impact of the three.
3. Given the trade disputes, the potential for impact exists.
4. Copper would be susceptible to price declines on weak data. Although any possible further stimulus remarks by PBOC officials could limit downside risks.

Scenario #1: Profit potential

China's factory activity has been contracting for five straight months. If the data comes in a lot weaker than expected, it could trigger a risk off environment in which we see gold rally. We may have gotten a strong signal to expect weak numbers tonight when the PBOC issued these statements over the weekend: China plans to step up efforts to lift economy -central bank

Scenario #2: Dud

If there are no surprises in the data don't expect much. This data comes out before most of the trading world has begun its operations. It's likely to have lower than normal impact unless we see significant deviations from forecasts.

Conclusion

Keep your eye out tonight for any surprises! The fact that the PBOC came out over the weekend attempting to reassure the markets by bringing extra stimulus is interesting. It could be related to what they already know and what we might find out in a couple hours with this data. The manufacturing sector is important to the China economy and it's also one that will start to deteriorate quickly as the trade disputes worsen, or get extended. When the data starts to reflect how serious the trade disputes are impacting the Chinese economy, the markets will be rotating out of risk and into safety. A bullish scenario for gold.

Let the trading week begin! Good luck comrades!

The big news for the day was ISM Manufacturing PMI coming in way below expectations. Nordea came out later with a pretty good article on it, but what I thought was really interesting was a graph they shared:



Apparently ISM Manufacturing Export Orders leads the main ISM Manufacturing PMI by 2 months. That could be very useful to know going forward!

I'm nervous about ISM Non-Manufacturing PMI tomorrow. The bad Manufacturing PMI print routed all risk assets over the past two days, confirmation of a slowdown in growth from Non-Manufacturing would really move the markets.

The events this week that I'm looking at as potential market movers are:

1. FOMC Meeting Minutes
2. US CPI data

I'll be researching to see if there's anticipation surrounding these minutes. Usually the media coverage of an event is a good barometer for the impact it's likely to have. I haven't seen much yet on the minutes, but it's still early. I expect there to be some market focus after the Fed's public disagreements leading up to and after the last rate decision. It wasn't quite as bad as what we saw from the ECB . But the minutes could shine some light on where the Fed thinks we are headed through the October and into the December meeting.

Consumer price index core and overall always have impact potential. I'll likely post a preview for that showing at least the recent impact on certain markets, including gold and probably the USD. Stay tuned!

All traders are welcome to chime in here and preview any event they feel needs to be discussed ahead of when it occurs. It's always great to see other members posting in this thread!

FOMC Meeting Minutes - October

1. FOMC Meeting Minutes

What to know/Key notes

1. The market is 100% aligned in expecting a 25 basis point rate cut at the next meeting later this month.
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2. The fact that the rate cut is fully priced in could diminish the potential impact of the FOMC Minutes. However, there is still plenty of reasons why this could move the markets, including rate implications going forward.
3. The data is still not convincing enough to warrant three consecutive rate cuts.
4. Within the Fed, there's been division. In September, only five governors thought the Fed's response had been correct. The 12 others were almost split between thinking the Fed's done too much and that they haven't done enough.
5. According to the most recent dot plot, only a third of the fed officials are on board for a rate cut in October.
6. Today, the day before the FOMC Minutes, Fed Chair Powell made remarks that might keep traders wanting more
   - "there is no preset course" (for rate cuts)
   - "the next meeting still several weeks away"
   - "will be carefully monitoring incoming information"
7. These minutes should give the markets some clarity on what's causing the division and what it might take to get another rate cut in December.
8. The bottom line is that without the international disputes, the Fed would not be accommodating the markets with such aggressive easing despite the lack of data to support it. With no improvements in those disputes, there should be a lot of the same language relating to it as a consideration to cut rates.

Recent impact on Gold and USD

April through July impacts here. Additional impacts ealier in the year (gold) here.

August - Not uncommon with reports that the market has to digest, gold and the US dollar just whipsawed with no clear initial direction.

Summary

The FOMC minutes can be one of the best events to trade but it takes patience. Market volatility should be expected before a direction on sentiment starts to present itself. That's why I strongly advise using caution if entering after the minutes drop. It can take some time before the direction, if any, takes hold. If it happens, there's potential to profit from easy momentum. If it doesn't, you don't want to be in the market. It's a risky play, so be careful out there!

Excellent advice. Thanks ET.

Euro PMI data - October Preview

1. French Flash Services PMI
2. French Flash Manufacturing PMI
3. German Flash Manufacturing PMI
4. German Flash Services PMI
5. EZ Flash Manufacturing PMI
6. EZ Flash Services PMI

Recent Impact

Last month's data ended up being very significant and having heavy impact. Here's a look at the impact on Gold and the EUR/USD.

Last month, first France, then Germany, and finally the EZ data came out all missing forecasts. As a result the Euro kept on moving lower, while gold headed higher.

Important Notes

1. French Services PMI usually has greater impact, since France doesn't manufacture much. Services industry is responsible for most of GDP.
2. The PMI data has been consistently either better or worse than expected. All of them, on the same nights. Because of this trend, it's created a situation where the French data has more impact than you'd expect.
3. If the French data surprises in either direction, traders begin to price in the German and EZ data causing an exacerbated move.
4. If the trend continues and the PMI data all are either better or worse than forecasts, the follow through is continuous throughout the 45 minutes or so.

Summary

PMI data has been an indicator of how the economies are doing in Europe. They have been and will continue to be closely watched, especially for disappointing data. The forecast for German Manufacturing PMI is 42. If it misses that forecast, the move could be pretty big.

Don't think for a second that just because recently the data has been all in line it will continue to be. It might not. It could, but might not. And, if you bet on it, it's a big risk.

I'd recommend waiting for the French data to be released. If the data surprises, particularly to the downside, I'm probably going to open a small position and consider building it as sentiment grows. The hope is by the German data you have enough profits to at least take some off the table or set a stop above break even. If you hold through the German data and the euro continues to move lower and gold higher, on weaker data, then there's probably not a good reason to exit in fear of strong EZ figures.Your exit should be based on when you think the move is over. That's probably when the market shifts its focus to the ECB meeting, which will be a big event as well. Big day in the markets.

The PMI data will move markets, but the ECB Press Conference is likely where we could see an even bigger impact. But that'll be up to Draghi. We'll see.

Be Ready! As always, regardless of what this preview says could happen, caution is advised first and foremost. Good luck out there!

Great insight. Thank you.

My pleasure and thanks for chiming in gunner! It ended up being a wild ride during these PMI releases. Here's a look at the price action during that time:

Here's what gold did:

EUR/USD:

Risk calendar events this week that metals traders should be keeping their eye on:

1. UK Parliament Brexit Vote
2. US Advance GDP
3. FOMC meeting
4. China's manufacturing data
5. US employment data
6. US ISM Manufacturing PMI

Advance GDP q/q - October Preview

1. Advance GDP q/q

Forecast

1. The consensus forecast is 1.6%, although some are calling for 1.7%.
2. The range of estimates per Bloomberg's survey of economists falls mostly within 1.4% to 1.8%.
3. Economists polled by Reuters also fell within the same range, although there were a comparatively high number of forecasts at 2.0%.

Notes

1. The Advance GDP data is the only GDP figure out of the US that has consistently had a high impact.
2. This time, GDP will be released ahead of the FOMC meeting which could mute the impact as the market will be focused on the fed meeting.
3. Advance GDP is the most likely to show a deviation from forecasts, as it's the first look we get at the quarterly growth data.
4. If the number surprises by a wide enough margin, impact should be expected.

Recent Impact

Jul 26

Apr 26

Feb 28

Summary

It might be a good idea to sit this one out as the main event will be taking place a couple hours later when the Fed releases the rate decision along with the statement, followed by the press conference. Although, don't discount the impact this can have if the number released surprises compared to what's been forecasted. Good luck out there!

Thanks. Agree that it makes sense to sit the event out till FOMC statement has passed a few hrs later.

FOMC Meeting - October Preview

1. FOMC Statement
2. Federal Funds Rate
3. FOMC Press Conference

Fed Funds Rate Forecast

The probability of a 25 basis point rate cut is almost 100%.

Rate Statement and Press Conference

This is where the real focus is. Three rate cuts in a row completes the mid-cycle adjustment. I'm expecting the Fed to relay that after this rate cut, they will pause and take a wait and see approach before more rate cuts. Even though it's exactly what he's said since the first rate cut, the market could be a little surprised that the easing cycle is pausing. Of course, the Fed could try and use language that leaves some room to question in order for the stock market to find some support.

Keep an eye on which members dissent. A divided Fed is the new norm. Boston Fed President Rosengren and Kansas City Fed President George are both expected to be dissenters, but how Chicago Fed's Evans votes will be closely watched. Evans is a more dovish member of the Fed, while George and Rosengren are known to be more hawkish. If Evans joins those two against this cut, December's rate cut probability is going to drop.

The Fed is expected to discuss the recent stress in the repo market. They've been increasing the size of their balance sheet and plan to through early next year. There's quite a bit of uncertainty on whether the Fed will address this with QE measures or address banking regulation.

The risk is skewed towards scenarios that support the US dollar, which would mean gold could see price declines. Although the repo market topic is a wildcard. It'll be interesting to see how the Fed deals with recent stress in the repo market. I expect anything outside of discussing banking regulations would be dollar negative and gold positive.

Recent Impacts

Expect some heavy volatility. Here's the last three FOMC meetings and how they impacted gold, eur/usd, and usd/jpy.

Sep 18

Jul 31

Jun 19

Summary

Tomorrow is a rare day and it doesn't get better if you're a trader that likes to know why things are moving. There will be no shortage of answers with quite a few high impact data releases, along with three major central bank meetings. Exercise caution. With so many events occurring throughout the day, there will be plenty of opportunities. Patience will be a virtue.

Wishing all my fellow traders luck.

ISM Non-Manufacturing PMI - November Preview

1. ISM Non-Manufacturing PMI

Recent Impact

Last month, this caused a larger than usual impact when the actual missed forecasts (52.6 vs 55.1 forecast and 56.4 prior). Below shows how gold, eur/usd, and usd/jpy reacted at release time.

Forecasts

1. Bloomberg and Reuters surveyed economists, 63 and 71 respectively, and both show most forecasts fall within a range of around 53.0 to 54.0.
2. The mean forecast from both Bloomberg and Reuters, are the same at 53.5.
3. There are quite a few forecasts that range as low as 52.0 and as high as 55.0.

Summary

On a weaker number, gold should rise as the US dollar falls. Conversely, on stronger than expected data, gold could fall as the US dollar rises. A large deviation would likely be necessary for any considerable impact. The impact will largely depend on if the figure released by ISM deviates from the forecast. I wouldn't recommend trading this release, although I do think it's worth keeping an eye on.

As always, caution is advised. Stay patient amigos!

The actual came in at 54.7 which was considered an outlier in the range of estimates in surveys taken by Bloomber and Reuters. The surprise isn't that it had impact, but the fact that after the initial pretty big move, there's been significant follow through.
Highlights from the report:

1. The non-manufacturing sector grew for the 117th consecutive month.
2. growth in business activity for the 123rd consecutive month
3. "Wrapping up fiscal year budgets — overall outlook is positive." (Finance & Insurance)
4. "Beginning of a new fiscal year brings a tremendous amount of spending." (Public Administration)
5. "Business remains brisk and well ahead of last year to date, as we near the peak of our busiest season. Looking ahead, our customers remain upbeat about their business well into next year." (Real Estate, Rental & Leasing)
6. "Preparing for an increase in holiday revenues." (Transportation & Warehousing)
7. New orders grew in October for the 123rd consecutive month, at a faster rate compared with September.

Just a thought. Now that rate cuts are paused, maybe the market is entering a cycle where risk is skewed towards stronger than expected data surprises. We'll see if any trend emerges.

Will the FED go negative?

I'd like to start a small discussion related to FED's monetary policy stance and give a few of my opinions on the topic.

The main question is will the fed go negative?

Policy rates are negative in a large number of economies, including the EU, Switzerland, Japan... etc. A necessary condition for negative rates is a recession. Even then, there appears to be a lot of doubt and uncertainty among FED members and going into negative rate territory.

Rosengren responded to a question saying “I would personally not choose negative rates in the next recession.”. Other FED officials, including Powell have also expressed skepticism about the wisdom of going negative

Their reticence is based, at least in part, on an internal study that the Fed conducted after the financial crisis. For starters, it is not clear that the Fed has the legal authority to take its policy rates into negative territory. Thus, an act of Congress may be needed for the Fed to go negative.

You can read the mentioned study here: https://www.federalreserve.gov/monet...0805memo05.pdf

The study also found that money market funds, which provide an important source of financing in the U.S. economy, could be negatively affected by negative rates. Therefore, shortterm rates could become volatile if the balance sheets of money market funds were to decline significantly.




All in all, I'm of the opinion that the FED will hold it's current rates until the end of this year, and I'm anticipating an early cut in 2020. Markets are currently expecting a 30% chance of an cut by March meeting, I believe these expectations will significantly shift to to the market expecting a cut more.

For now the 75bps cut has been more then sufficient stimulus, rate cuts might have not even had as much of an impact as FED wanted them to have...even long-time ultra-dove James Bullard said in a separate speech on Thursday that it now “makes sense to wait and see.”

Last week, Powell continued to cite potential risks, and only to the downside, stating “there’s no signs that things are overheating,” while trade risks are “ongoing.”

Another concerning factor for markets and policymakers was Trump's statement that “if we don’t make a deal, we’re going to substantially raise those tariffs.” The threat of further trade war escalation is therefore very real, as are the chances of the Phase I deal falling through, despite the ebullience sweeping across markets recently. With that in mind, we take Powell at his word that, for now, the economy is in a good place, but further easing may be warranted as things develop.


What do you guys think? I'm seeing a cut in Q1 2020, and a massive correction in late Q2 or early Q3 2020.

Will the FED go negative?

I'd like to start a small discussion related to FED potentially going into negative rates in the near future.

The main question is will the fed go negative?

Policy rates are negative in a large number of economies, including the EU, Switzerland, Japan... etc. A necessary condition for negative rates is a recession. Even then, there appears to be a lot of doubt and uncertainty among FED members and going into negative rate territory.

Rosengren responded to a question saying “I would personally not choose negative rates in the next recession.”. Other FED officials, including Powell have also expressed skepticism about the wisdom of going negative

Their reticence is based, at least in part, on an internal study that the Fed conducted after the financial crisis. For starters, it is not clear that the Fed has the legal authority to take its policy rates into negative territory. Thus, an act of Congress may be needed for the Fed to go negative.

You can read the mentioned study here: https://www.federalreserve.gov/monet...0805memo05.pdf

The study also found that money market funds, which provide an important source of financing in the U.S. economy, could be negatively affected by negative rates. Therefore, shortterm rates could become volatile if the balance sheets of money market funds were to decline significantly.

All in all, I'm of the opinion that the FED will hold it's current rates until the end of this year, and I'm anticipating an early cut in 2020. Markets are currently expecting a 30% chance of an cut by March meeting, I beliefe these expectations will significantly shift to to the market expecting a cut more.

For now the 75bps cut has been more then sufficient stimulus, rate cuts might have not even had as much of an impact as FED wanted them to have...even long-time ultra-dove James Bullard said in a separate speech on Thursday that it now “makes sense to wait and see.”

Last week, Powell continued to cite potential risks, and only to the downside, stating “there’s no signs that things are overheating,” while trade risks are “ongoing.”

Another concerning factor for markets and policymakers was Trump's statement that “if we don’t make a deal, we’re going to substantially raise those tariffs.” The threat of further trade war escalation is therefore very real, as are the chances of the Phase I deal falling through, despite the ebullience sweeping across markets recently. With that in mind, we take Powell at his word that, for now, the economy is in a good place, but further easing may be warranted as things develop.

What do you guys think? I'm seeing a cut in Q1 2020, and a massive correction in late Q2 or early Q3 2020.

I don't believe the FED will continue to cut rates as the economy is steadily growing thus far.

US Employment Data - December Preview

1. Average Hourly Earnings m/m
2. Non-Farm Employment Change
3. Unemployment Rate

Forecasts

NFP
The range of forecasts for NFP is from about 140K to 210K, excluding outliers. If the number comes in outside of this range, expect significant impact.

Forecasts submitted after ADP data (missed big) have been mostly below the average forecasts, closer to the lower end of the range of about 140K.

Unemployment rate

While most economists are predicting the unemployment rate to remain unchanged at 3.6%, there's a significant bias towards 3.5%. If this misses it should beat expectation.

Average hourly earnings

While most economists are predicting wages to tick up from 0.2% to 0.3%, there's a slight bias towards 0.4%. While chances are slim, if this data does come in at 0.4% vs a consensus 0.3% expect significant impact.

Recent Impacts

Nov 1

Oct 4

Outlook

Heavy volatility is always expected on the US employment data. Impact should be increasing as the Fed is now more data dependent since shifting to a more neutral forward guidance on rates.

After the ADP data came in way lower than expected on Wednesday, the risk in NFP seems to be in a miss. At the same time forecasts for both the unemployment rate and average hourly earnings are skewed towards beating market forecasts. I see tomorrow as a good recipe for a big whipsaw. Part of trading these events successfully is avoiding whipsaws. Therefore, I'm advising extreme caution. It's probably best to see how the data unfolds and if all three data releases beat/miss then a position can be initiated with far less risk. The more the data deviates from forecasts the greater the probability for continuation after any initial knee-jerk reaction.

Gold will rally on worse than expected data while the US dollar should fall. On better than expected data, expect gold to fall and the US dollar to appreciate. There is more upside potential in gold right now. I'd be more inclined to initiate long entries in gold/short the USD after worse than expected data. This data is prone to revisions so be careful and wait to see if last month's data is revised prior to aggressively trying to trade this. Not investment advice, just some very good educated guesses.

Good luck fellow traders!