High Impact Events Trading... Gold & Copper

US Employment Data - January Preview

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

Forecasts

NFP

1. Economists surveyed by Bloomberg are mostly in a range between 125K and 205K. Average forecast is ~162K while the median is 160K.
2. Economists polled by Reuters are mostly in a range between 135K and 200K. The median forecast is 164K.

Unemployment rate

1. Economists surveyed by Bloomberg are mostly in agreement at 3.5%.
2. Economists polled by Reuters are mostly in agreement at 3.5%.

Average hourly earnings

1. Economists surveyed by Bloomberg are divided between 0.2% and 0.3%, with more forecasting 0.3%.
2. Economists polled by Reuters are also divided 0.2% and 0.3%, with most forecasting 0.3%.

Recent Impacts (gold, eur/usd, and usd/jpy)

Last month we saw a much better than expected NFP as well as an upward revision to prior. The unemployment rate beat estimates (3.5% vs 3.6%). Wage inflation however missed, coming in at 0.2% vs 0.3% expected. Then, the prior month’s data was revised up to 0.4% from 0.3%.

Outlook

As always, US employment data is expected to bring heavy volatility across asset classes. Currently, the markets are focused on US-Iran tensions which have created a risk/on or off sentiment depending on the latest news cycle. Mostly risk off.

ADP employment data showed a big surprise, better than expected figure of 202K. However, I’ve said it before and I’ll say it again, don’t use ADP to predict NFP. It’s a trap! Last month ADP had one of it’s biggest misses in recent history while NFP beat forecasts by a wide margin.

Unemployment claims on average, was 5K higher (on a weekly basis) in December than in November. This suggests we should see this month’s NFP reading lower than last month’s (266K).

Avg hourly earnings tends to have more impact when the Fed is making changes to rates. Since they’ve changed to a neutral stance, the impact should not be as significant as it was in the later half of 2019. However, wage inflation always has the potential to trigger big moves, especially if it misses by more than 0.1%.

The unemployment rate is usually data that I don’t put too much emphasis on, but if it ticks down again it’ll hit fresh 50+ year lows. Whether significant or not, headlines will carry it and it would drive sentiment/markets.

Gold would move lower on higher than expected payroll data and avg hourly earnings, as well as a lower unemployment rate. In this scenario the US dollar would appreciate. Conversely, gold will head higher on a higher unemployment rate, lower payrolls, and lower avg hourly earnings. The tricky part here is that there’s a good chance some data comes in better, while other data misses. Then, there are revisions to contend with.

I recommend being patient and choosing your entries wisely. The US employment data usually gives us plenty of time to figure out what’s going on. If not, there’s always next time. Good luck out there!

Great infos, thank you for putting those reports out. I really not sure but do you mean, gold will head higher in this case ?

Tragruel, Thank you! You are absolutely correct! Great job finding that mistake sir!!

thank you ! I'm happy because it means I understand better the fundamentals, all your text was very clear and precise so I thought it was really an easy honest mistake to do, with all those higher/lower words that interact with each others.
As for trading, I got burn last week trying to catch a falling knife, I dont have the calm yet needed to engage with big news events like that... I will watch of course. green pips to you

Great! .. thanks @ET for posting your valuable view.
as I see ... NFP figures publish out still lag nearly a week isn' it? & we see there was a Big Sell on Wendsday!
& Which possible scenario that could lead GOLD into ranging?
& as i see you put more Emphasis on this
"Unemployment claims on average, was 5K higher (on a weekly basis) in December than in November. This suggests we should see this month’s NFP reading lower than last month’s (266K)."

Good Day all!

Unless we get a BIG miss in NFP or hourly earnings I don't see gold raging. But anything could happen!

Very astute observation! The first time I've ever mentioned unemployment claims in an NFP preview.

thanks @ET...my english is very bad! ... i gotta read your post few times to get your idea
Yes!, I understand ... unless the NFP is much lower than expected & the Unemployment rates is significant higher ... scenario might still favor dollar index... but anything could happen

US Retail Sales - January Preview

1. Core Retail Sales m/m
2. Retail Sales m/m

Recent misses vs expectations

Recent history is telling us that forecasts have been a little high lately. Of the past four releases, core retail sales has missed forecasts all four times. The overall number has missed twice of those same for times.

Core Retails Sales

Retail Sales

Recent impacts

Displayed below is the recent impact on gold and the US dollar (using eur/usd and usd/jpy).

Dec 13, 2019 - The December release missed forecasts on both numbers, but upward revisions limited any impact.

Nov 15, 2019 - The November release showed a lower than expected core number while the overall number beat expectations, which limited impact.

Oct 16, 2019 - The October release missed forecasts on both numbers with upward revisions, however the miss surprised the market and gold rallied.

Notes

Retail sales data always has the potential to carry a hefty impact. This month we'll get holiday numbers, which are widely expected to show the best holiday season in at least three years.

Although the Fed is on hold with interest rates, during the recent cuts they continually stressed consumer spending as a key indicator of the health of the US economy.

Recent data has shown income and wages on the rise in a healthy labor market, and supports why consumers would have spent more during the holiday season. However, this is reflected in the forecasts so the more important factor is where the data comes in vs relatively high forecasts. The forecast for core retail sales is 0.5% and 0.3% for the overall number.

On stronger than expected data, gold should fall while the US dollar rises. Conversely, on weaker than expected data, gold will appreciate while the US dollar falls.

This data is prone to revisions to prior data and therefore be careful with whipsaws. Nobody likes to get whipped!

January retail sales is usually hard to predict due to holiday shopping and the expected increase in sales. The best way to play this data is to be patient. Opportunity usually lies in big misses that send markets in a direction, giving traders ample time to get in and get out with lower risk (compared to getting in on a knee-jerk reaction). Events trading is always risky. Be careful out there and good luck!

Is there anyone watching USA China deal processing ?
How is it going to impact Gold and other pairs?

Trump is speaking now. It was largely expected to be signed and there isn't much in terms of new information. I don't expect much volatility related to this trade deal signing/announcement unless they start discussing details about Phase 2.

good morning traders,what about US Treasury Sec Mnuchin Speaks

GM all....Is there any idea about FOMC Meet???

Hi Rudrax, sorry I missed this! Welcome to the thread. You're participation is always appreciated.

I hope to get a preview up within the next hour or so.

FOMC Meeting - January Preview

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

Recent Impacts

Dec 11, 2019

View the October, September, and July impacts on gold and the usd (eurusd and usdjpy) in my December preview here: https://www.metalsmine.com/showthrea...2#post12656172

Notes

As with last month's FOMC meeting, a rate cut is off the table. The difference this month is that there are events taking place that traders are more focused on. The coronavirus is taking center stage and it's impacting everything. It's a ripe trading environment that's offering ample opportunities as we've seen quite a bit of risk off (and some risk on) sentiment.

The rate is widely accepted as not changing after the Fed changed their policy stance to neutral following the 'mid-cycle adjustment' of three rate cuts. There's a chance that the statement could have a bearish tone. There's some speculation that the Fed could start preparing the markets for a rate cut in the middle of 2020, which is somewhat being reflected in the rate probabilities via CME's FedWatch Tool:

Aside from any tone the Fed might bring, traders will be watching for what the Fed thinks about the recent developments in the US-China trade relations, and if they bring up the risks related to the coronavirus. If so, that could be the focus as the markets are looking for guidance on how to deal with the risks associated with such an uncertain and uncommon event.

This will be a tricky FOMC meeting to trade because on one side the Fed could scare markets into some risk off sentiment with any talk of coronavirus risk. In any risk off environment, I'd expect gold and the US dollar to appreciate which breaks their usual negative correlation. On the other hand, the market is pricing in a 12.7% chance of a rate hike for this meeting, according the CME's FedWatch Tool. There's no chance of that happening but that still presents the market with having to price in the slight deviation from expectations. Along with keeping rates steady, a more cautious tone will be US dollar negative and gold positive.

In both scenarios presented above, gold seems like it has some significant upside potential. I'd advise caution and not take that as a prediction, especially because it's relatively high price levels it's currently trading at. The risk related to this event is likely skewed towards gold moving higher and the US dollar possibly getting whipped.

It's also important to consider a third scenario where the Fed deliberately attempts to remain vague to buy time and not lead the markes one way or the other. In this case, all else goes out the window and we'd see the US dollar rise and gold prices come down. I'd wait to see if there's a direction that takes hold, which may not ultimately occur until Powell's testimony.

As always, caution is advised. Good luck fellow traders!

thank you Sir,,, I would like to have your valueable analysis and guidance in this Trading Battle Field...
green pips Sir.

In a rush to get this posted I added Powell's testimony to the charts. It's the FOMC Presser not testimony. Sorry for any confusion guys!

Fixed: First arrow is for FOMC Statement and second one for the Presser.

Sir,,, It is said Actual greater than Forecast is good for currency...
What if the Actual will be equal to the Forecast...
Just curious that's why asking a silly question.

In this case it's all about the FOMC Statement and FOMC Presser 30 minutes later.

hello Sir,,, what is your view about Brexit meet today

It's already been priced in. But we will see ongoing volatility throughout the Brexit negotiations as the UK tries to secure trade deals and agreements.