High Impact Events Trading... Gold & Copper

In this thread, I want to focus on upcoming high impact calendar events. Any event-related discussion is welcomed!

- Australia's Cash Rate: https://www.metalsmine.com/#detail=103920
- RBA Rate Statement: https://www.metalsmine.com/#detail=103922

From what I've gathered so far, the RBA would have to surprise the markets with an extremely dovish tone for any significant moves. I'm not going to attempt to trade this event because it probably won't move metals enough.

This risk is in the statement. The ASX RBA Rate Indicator is showing the market is fully expecting a rate cut to 1.25%:

The charts below shows impact this event had on Gold and Copper on May 7th, the RBA kept rates unchanged when the market was 50/50 on whether they'd hike or not. The moves were minimal. The reaction to tonight's rate cut/statement will likely be similar.

Any thoughts on this Friday's employment report? A big increase in average hourly earnings would be a game changer for the whole investment landscape, but it seems unlikely from where I'm sitting.

The further you are from a data release, the less time you should invest into researching. The main point of researching events is to identify where the risk is. The closer we get to the release, the easier that is to identify. It also requires you to pull an all-nighter leading up to the actual release. I've been trading scheduled data releases for almost 15 years. While I can't say I've conquered the beast, I've learned a lot along my journey. Keep reading if you dare...

As we get closer to the economic data there are some points to consider:

1. patience is key
2. new information enters markets
3. forecasts can change

New information enters the market, rendering prior research useless. I've been there. If you based your theory on a certain aspect of the labor market, then AP News releases an article explaining to you how that aspect is irrelevent, you've just wasted time. If you stay patient and gather information leading up to the event, you can minimize mistakes like this. Gather all the info you can about the event you're planning to trade, then later on you can organize it and make sense of it all.

Next, forecasts change. I believe that when the median forecast changes, it signals a potential surprise in the upcoming actual. Example: if NFP forecast is 180k, then it changes to 186k, there's a good reason for that. It's been a precursor to a surprise in the data. Additionally, the surprise will be in the direction of the change in forecast.

It's completely logical, and here's why it happens. At least this is my best theory from the research I've done.

1. Bloomberg and various market data distribution services receive surveys comprised of economist forecasts.
2. From this, they display median forecast so traders know what the market is expecting.
3. Then, additional economists submit forecasts late, and the median forecast changes.
4. After this change in the forecast, the market usually hasn't adjusted their expectations. When the data comes out, it's usually a big surprise.
5. The surprise in the data is either higher or lower, but the same direction that occurred in the forecast change.

Here's why I think this makes perfect sense. Economist surveys are not weighted. They should be, but they're not. The later the submission, the more data and information was available to make that forecast. Therefore, it should hold more weight than others that were submitted with insufficient data. If the forecasts were weighted, this would not happen. At least that's my theory.

In our example, after this new, better forecast changes the median by 6 (180 to 186), shows us that there's a slightly different median. In actuality, the median is now lower than what the actual forecast should be, based on the latest data. The late submissions were way above 186k.

When the data is released, its quite common to see a big surprise. I can't say I've investigated this enough to be completely sure that this is what's happening. But with my 20+ years of experience in the markets, it's the best I could come up with. I don't trade off of this, and neither should anybody else. It's just something to note. Keep in mind, if one lazy bum submits a late forecasts with guesses, my entire theory is debunked.

I didn't mean to get that deep into it, I guess I'm getting a little excited for NFP on Friday.

Next up, is US ISM Non-Manufacturing PMI data.

ISM Non-Manufacturing is expected to remain roughly in line with last month's 55.5 reading, with a possible slight uptick.

In one of the Unites States longest running streaks, for the 117th consecutive month, April's services activity continued to expand. Growth in the sector did start to slow though, showing some underlying weakness in lower new orders, weaker employment index, and a decrease in the price index. That aside, the market still fully expects Non-Manufacturing PMI data to signal a continued expansion.

With focus on trade policies and the yield curve inversion, it is highly unlikely that we will see much anticipation leading up to this event. It's generally expected the market will shrug this data off. Given the consistency in the data, there's not a likely scenario where the markets are surprised on the data. We should see some light volatility on the data, but as far as trading it, I'll be staying out of this one.

Take a look at the last three data releases and how they impacted metals (gold, silver, platinum, copper). March showed some trade opportunity, when the figure came in way better than expected. Aside from that, it's barely a tradeable event.

May

Attached Image (click to enlarge)

April

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March

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Wow, that's extremely valuable info, thanks a lot for sharing.

Your theory makes complete sense. There's got to be an edge to this, I'm going to have to see if I can quantify it.

I'd be interested to see what you come up with. It's tough because you need to wait for high impact events. Then, from those, you need late forecast changes. It doesn't happen often so I'd imagine that this could take a while.

ECB meeting today where they are due to announce details of their new money printing program TLTRO3. Any possible impact there on Gold? One would assume it would be bullish for gold.

Stay tuned... a preview for the ECB meeting coming your way soon!

Next up on the calendar is the ECB meeting followed by the press conference. We won't focus on the rate decision, since they won't be cutting rates. Market fully expect no change in the main refi rate. In focus:

1. Monetary Policy Statement
2. ECB Press Conference

Recent Data
So far this week, leading up to this event, we've had a few data releases worth mentioning. First, PMI data out of the eurozone is still signaling more of a contraction with most readings coming in below 50. Notably, Germany's PMI data continued to remain around lowest levels since 2012. German manufactures continued to make cutbacks in employment, falling the most in over six years. Underlying inflation also showed signs of weakness ahead of the Eurozone's CPI data the following day. CPI came in lower than expected as inflation keeps on showing little sign of picking up. Inflation expectations also keep sinking. Wednesday's schedule had nothing to report. Today, we've already have the latest Eurozone GDP data, coming in as expected, at 0.4%.

ECB policy statement won't give us much
Moving on to the more important matter, the ECB meeting taking place in a couple hours. The major focus is on the statement they'll release located here. Just a heads up, they've been known to release more than one report at release time. I wouldn't rule out a separate document for the LTRO info. While the LTRO will overshadow any revisions to CPI and GDP forecasts, they can still trigger moves if the changes are large enough from what was previously delivered. In case you need it, the latest forecasts were: CPI - 1.1%, 1.6%, 1.5% for 2019, 20 & 21, respectively and GDP - 1.2%, 1.5% & 1.6%. No big changes are expected.

LTRO details is what to look for
As promised, the ECB is due to announce details in this June meeting regarding the previously announced LTRO program, set to begin in Sept. Generally, the market's reaction will reflect the extensiveness of the program. The biggest questions are how generous the terms will be. How will they be priced? Will the interest rates be negative, zero, close to zero? There's some speculation that they could set variable rates, which would have implications about how they'll use the program in future policy moves. There's no telling what to expect. Be careful if you plan to trade at or shortly after this release.

Draghi's press conference
It's not uncommon for the market to react to the statement and take a direction, only to reverse course after Draghi starts speaking. This is where the most opportunity might exist. If Draghi has an agenda to deliver a tone, his forward guidance usually has some significant impact. It's not always the case, but since the potential is there, be ready.

What to expect
There's no telling where the risk lies here. Gold's rally could continue if the markets interpret the LTRO, statement, forecast revisions, draghi's remarks as more signs of a global slowdown. In that case, I'd look for copper to depreciate. However, given the recent trend in gold, it would be wise to look to gold for any trading opportunity. Preferably long.

To trade or not to trade
I'd recommend sitting this one out, unless there's a strong move with follow through. That might be the only way to profit during this event. As the markets digest the info, the slower moves might allow for some profits on a good entry. My recommendation is to be cautious. It's unpredictable and a tough event to trade. Don't be afraid to be a spectator if there's nothing doing.

Recent releases
Below, the images show charts of gold and copper during the April and March rate/statement and press conference, respectively.

April:

March:

Good luck my fellow traders!

Imma keep an eye on this thread EventsTrader.

Welcome to the jungle!

If there's any traders out there that have anything to say about tomorrow's US labor data, don't hesitate to get it posted.

After a pretty slow week, we finally get a good event. NFP as always, is expected to bring heavy volatility. The preview will be up soon. Stay tuned.

man! good stuff! thanks for breakin bread! I'm holdin this gold all the way through. I kno..... I kno...about news but no riskit...no biskit!

nahhh I'm loonnnng Gold, long range, but all ears. TY!

NFP Preview - June

Let's analyze the data releases and possibly identify trading opportunities in Gold and Copper. In a little over four hours, the BLS will release the all-important jobs data listed below:

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

Data expectations

1. the range of estimates for NFP is 80k to 228k. The consensus is 180k
2. the unemployment rate is expected to remain at 3.6%, a 49-year low
3. the increasingly important Average Hourly Earnings, inflation in wages, is forecasted to rise from 0.2% to 0.3%.

Some quick notes

1. The labor market is strong, and likely to continue that trend
2. Payrolls are expected to come down from last months 263K, to about 180K
3. The market is now pricing in a greater chance for more than two rate cuts
4. Fed Fund Futures data shows traders pricing in lower rates by 50 basis points by Oct 30 meeting
5. According to bets in the futures market, expectations for another rate cut before the year's end are pretty high. See here: CME FedWatch Tool
6. Be aware that Canada's labor data is at the same time, and can bring more volatility
7. Wage inflation is arguably the most important data of the three, but only if is deviates enough.
8. There's not much in this data release that would dial back market expectations of rate cuts.
9. I'd expect any rally to have limited follow through.

Recap
Expectations for rate cuts are related to US-China trade disputes, possible Mexican tariffs, the uncertainty surrounding the UK's exit from the EU, just to name a few. Not much can happen here to change those rate cut expectations. Any moves in gold and copper could be limited, depending on how big deviations are from forecasts.

Last few NFP releases

May

Last month, both gold and copper had strong reactions to mostly better than expected data. The rally lasted about two hours as both gold and copper rallied considerably. Copper seems to have had a slightly stronger reaction.

April

Attached Image (click to enlarge)

April's release looked like a tough one. Gold's volatility amounted to pretty much nothing but a whipsaw. Here's an example of when to stay out of the market after data.

March

Attached Image (click to enlarge)

March's NFP disappointment send gold higher and continued for the next hour or so. Copper was largely unfazed.

Conclusion
Two of the past three NFP releases presented trading opportunities. Today's release may not have as much potential, since the data is somewhat being overshadowed by other events going on in the world right now. Any trades should be entered after the release and only if you determine continuation is likely.

Good luck fellow traders!

Beautiful ET. I personally am going in slightly long on Silver going into NFP.

At the time of your post silver was around $14.86. Since then it's had a nice rally. I'm wondering if you got out after NFP or did you hold through the next leg up? That was a risky move, but it looks like it paid off.

Great analysis ET!

Yeah I captured the entire meat of the move. Thanks! Great analysis there which helped me frame the trade!

Looks like CPI will be the biggest event of the week. I hope to hear your thoughts on it!