InvestMacro

Dollar Index Has Updated Local Highs Again

by JustForex

The US dollar strengthened against a basket of currency majors again. The dollar index (#DX) closed yesterday in the green zone (+0.17%). News of the plane crash in Iran is in the focus of attention. Previously, it was assumed that the passenger Boeing crashed due to technical malfunctions. However, now the British and American media say that it was Iran that fired two missiles, as a result of which a crash occurred.

Investors expect additional drivers. Today, financial market participants will assess labor statistics from the US and Canada. We recommend paying attention to the difference between the actual and forecasted values of the indicators. These reports may have a significant impact on the dynamics of currency majors in the short term.

Today, during the Asian trading session, optimistic economic data from Australia have been published. Thus, retail sales rose by 0.9% in November instead of 0.4%.

The “black gold” prices have been declining. Currently, futures for the WTI crude oil are testing the $59.40 mark per barrel. At 20:00 (GMT+2:00), Baker Hughes US rig count will be published.

Market Indicators

Yesterday, there was the bullish sentiment in the US stock market: #SPY (+0.68%), #DIA (+0.75%), #QQQ (+0.85%).

The 10-year US government bonds yield is consolidating. At the moment, the indicator is at the level of 1.86-1.87%.

The Economic News Feed for 10.01.2020:

– Report on the labor market in the US at 15:30 (GMT+2:00);
– Labor statistics from Canada at 15:30 (GMT+2:00).

by JustForex

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Commitment of Traders (COT) Data Suggests Gold In Rally Mode

By TheTechnicalTraders – Many people believe the price of Gold will need to fall to support Institutional short positions. We don’t believe this is the case. The Commitment Of Traders (COT) Data suggests Commercial Hedgers have a large and growing shot position that is a very positive sign for a continued rally in Gold and Miners looking forward months from now.

Don’t think about COT data like everyone else with it comes to gold.

Over the past 20+ years, every time the COT Commercial Hedgers position in Gold falls, weakens substantially, or makes new multi-year lows the price of gold rallies.

Why record commercial short hedge position is bullish

It is my belief that the markets will move in favor of where the big money (commercial/institutions) want it to go in most cases. so if the commercial’s keep adding a short hedge position that means they are adding to heir long exposure and need to add more of a hedge to help protect their growing LONG position.

The weakening COT data from 2001 through 2012 is a perfect example. As Commercial Hedgers moved away from Gold, the price of gold rallied to the all-time highs.

Additionally, after the major bottom in Gold in 2016, Commercial traders would have bought and accumulated gold driving the price higher.

Now, in late 2018 and throughout all of 2019, the Commercial Hedger COT position in Gold has fallen to the lowest level in the past 20+ years. This suggests the rally in Gold has really just begun to accelerate to the upside and there are more people buying gold than ever before who are buying protection (hedging)

The COT data I find very deceiving because it’s displayed and delayed in a way that makes traders and investors think the opposite.

Wall Street is in the business of making a market, and that means they play a game of deception so you do the opposite of what they are doing. Wall Street show As you watch gold moving with your new view on the COT data, you will notice gold will rally and post strong moves, then a couple of weeks later the COT data comes out.

With all that said, this is just my view and opinion of how I read the COT data for gold specifically. As with every chart and trader, there are many different ways things can be analyzed and viewed.

Since the price just had a strong advance, and you now see the commercials have added to their short position you naturally expect a pullback after a price rally especially when you see the big players adding to their short/hedge position. But what really just happened? the big players bought gold, and they had to hedge some of their new position. Very bullish in my opinion. While I do not use it for trading, it is a good confirming indicator of a trend.

Our research team, as well as our proprietary price modeling systems, suggested that Gold may rally to levels above $3700 before reaching an ultimate peak. Currently, our predictive modeling systems are suggesting the next target is well above $1600 and we believe our original target from our October 2018 analysis, of $1700 to $1750, is still very valid.

We believe this current upside price rally in Gold will attempt to clear the previous high levels near $1924 – from September 2011. We believe moderate resistance/rotation near $1700 to $1750 will be the last level of price resistance before a continued rally will push Gold prices above the $1924 peak – possibly stalling just below $2100. Once price breaches the previous high level, we expect a short period of price rotation before another upside price acceleration takes Gold prices above $2400 to $2500.

Gold Miners are poised for an incredible upside price rally if our analysis of Gold is accurate. GDXJ is currently trading near $42 – showing moderate weakness while Gold has seen some strength this week. We believe Miners will do very well once Gold really breaks out above $1750 and begins to target the previous all-time high level.

Much like our expectations for Gold, we believe GDXJ will rally to levels near $60 once this current overbought condition wears off. Then we expect it to head towards $60 and rotate lower for a few weeks before attempting to rally further to levels above $70+.

Take a minute to review some of our recent Gold research posts to gain further insight

January 2, 2020: ADL GOLD PREDICTION CONFIRMS TARGETS

December 30, 2019: METALS & MINERS PREPARE FOR AN EARLY 2020 LIFTOFF

December 4, 2019: 7 YEAR CYCLES CAN BE POWERFUL AND GOLD JUST STARTED ONE

You won’t want to miss this incredible run in Precious Metals and Miners. Follow our research. Learn how we can help you find and execute better trades. We’ve been warning all of our followers of this move for months – now it is about to get very real. In fact, we are giving away free silver and gold bullion bars to all new subscribers of our trading newsletter!

As a technical analysis and trader since 1997 I have been through a few bull/bear market cycles, I have a good pulse on the market and timing key turning points for both short-term swing trading and long-term investment capital. The opportunities are massive/life-changing if handled properly.

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Chris Vermeulen

TheTechnicalTraders.com

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The USD/JPY is easily holding above 108.00 – will today’s NFPs change this?

By Admiral Markets

Source: Economic Events January 10, 2020 – Admiral Markets’ Forex Calendar

Despite the recent developments in the Middle East since the US Pentagon launched an airstrike that killed Iranian commander Soleimani, stoking fears that a war between the US and Iran could be in the near future, the overall picture in the USD/JPY didn’t substantially change.

With no sustainable risk-off hitting the market and volatility staying all in all quite low, a sustainable drop below 108.00 wasn’t seen, in fact the USD/JPY is currently trading back above 109.00 and in positive territory for the week.

Whether this will change or not is not only dependent on the developments in regards to the US and Iran, but also dependent on today’s Non-Farm Payroll data set which will be published at 1330 GMT.

The consensus for December lies at 164,000, after NFPs increased by 266,000 in November 2019. Main driver for the solid print in December was certainly the strong number from the manufacturing sector, reflecting the return of workers from a GM strike. But given the latest ISM Employment numbers and without striking workers returning, this month’s NFPs could likely disappoint.

If so and expectations of market participants of at least one 25 basis point cut in 2020 keep on increasing significantly above 70% (currently and according to the Fed Watch Tool we see a likelihood of ~60%), the USD/JPY could see another drop down to 108.00.

In general, we still consider the USD/JPY an attractive short candidate from a risk-reward perspective midterm.

Technically, the main focus stays on 106.80/107.00, where, from a technical perspective, a break lower could result in a drop as low as 105.00 and probably even lower.

On the other hand: a push above 110 activates 110.70, playing into the cards of USD/JPY bulls, at least short-term:

Source: Admiral Markets MT5 with MT5-SE Add-on USD/JPY Daily chart (between October 30, 2018, to January 9, 2020). Accessed: January 9, 2020, at 10:00pm GMT – Please note: Past performance is not a reliable indicator of future results, or future performance.

In 2015, the value of the USD/JPY increased by 0.5%, in 2016, it fell by 2.8%, in 2017, it fell by 3.6%, in 2018, it fell by 2.7%, in 2019, it fell by 0.85%, meaning that after five years, it was down by 9.2%.

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By Admiral Markets

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Dec 2019 Payrolls Data On The Docket

The monthly nonfarm payrolls report will be coming out today from the US Labor Department.

This will be the first payrolls report for this year, but the data covers the month of December. Overall, the expectations for December NFP are somewhat conservative.

Economists are forecasting that unemployment will be steady at 3.5%. The payrolls estimates are towards the 150k region, while there is some optimism that wages will rise 0.3%, marking a slightly higher pace of increase during the month.

The recent ISM manufacturing activity, however, casts a dark shadow on the payroll estimates. The underlying data in the manufacturing sector is pointing to months before any recovery could take place.

This could potentially mean that the average payrolls may take a hit.

The November payrolls saw a big boost, largely thanks to the General Motors strike. This enabled employment in the motor vehicle sector to rise 41,300. Indirectly, this also helped the overall manufacturing sector jobs to rise 54,000 as well.

US Change in Nonfarm payrolls, November 2019

Besides the payroll figures, focus will also stay on wage growth. US wage growth has been steady near 3.0% – 3.1% on average. For the moment, with inflation staying sluggish, wages continue to outstrip inflation.

However, given the risk that inflation could rise, wages will need to pick up steam.

One interesting factor to look into will be the diffusion index. The diffusion index measures the percentage of manufacturing industries contributing to the overall job figures.

The data has been hinting towards a core improvement in the manufacturing sector. A similar trend could potentially point to the slump in the manufacturing sector turning the corner.

But this means that investors will have to wait at least for three months to see this taking shape.

Mixed Manufacturing & Services Sector Activity

The latest data covering the business activity in the services and manufacturing sector paints a mixed picture.

While the manufacturing sector continues to remain in a slump, the services sector, on the other hand, rebounded during the month. However, employment in both the services and manufacturing sector fell slightly from the month before.

Given the weakness in the employment sub-sector, the expectations for a weaker headline print stay consistent. The data also indicates that the US economy remains in the late stages of economic growth.

Often during this period, one gets to see lower payroll figures. Therefore, focus will shift to the unemployment rate and wage growth. With the forecasts showing that the unemployment rate will be steady at 3.5%, wages will remain the big-ticket item to watch out for.

US Wage Growth MoM – November 2019

Early indications show that inflation could rise in the coming months, largely on account of higher fuel prices. Thus, amid this backdrop, a sluggish wage report will be disappointing for investors.

Fed officials are, however, likely to remain on the sidelines, giving room for monetary policy to take its course until March. The big question is whether the Fed will hold rates steady in March.

As a result, the December NFP will be of importance. Any consistent signs of weakness in the labor market could trigger officials to take preventive measures, by cutting interest rates.

In the short term, today’s impact from the NFP will be seen across all asset classes including equities and forex.

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EURUSD: market awaits Non-Farm Payrolls report

By Alpari.com

On Thursday, January 9, the euro was up one point at the close of trading. The price consolidated at 1.1105, in a narrow range. It was business as usual after President Trump’s speech on Wednesday, as the markets braced themselves ahead of the publication of the US Non-Farm Payrolls report, scheduled for later on today.

Today’s events (GMT+3):

09:45 Switzerland: Unemployment Rate s.a (MoM) (Dec).
10:45 France: Industrial Output (MoM) (Nov).
16:30 Canada: Net Change in Employment (Dec).
16:30 USA: Nonfarm Payrolls (Dec), Average Hourly Earnings (YoY) (Dec), Labor Force Participation Rate (Dec).
21:00 USA: Baker Hughes US Oil Rig Count.

Current situation:

The price did not recover to 1.1130, as predicted. In fact, it was in a horizontal range of 1.1100-1.1120. In six hours, we can expect the price will meet with the balance line. When this happens, the market will be ripe for sharp fluctuations to occur.

Today, the focus is on the US Non-Farm Payrolls report. It is predicted that employment increased by 164,000 in December, compared with an increase of 266,000 in November, while the unemployment rate stayed around 3.5%. The indicator for jobs is unpredictable, therefore, has a strong influence on the main pairs. On days like this, it is better to refrain from making forecasts. Although technically, the pair is ready to decline.

Trump tweeted that he would sign the trade agreement with China on January 15, the ceremony will take place at the White House with senior Chinese figures in attendance. Chinese Deputy Prime Minister Liu He, who leads the country’s negotiating delegation with the US, will be in Washington on January 13-15.

By Alpari.com

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SPX500: Bulls Next Target 3319.4?

The current SPX500 structure hints to a bullish impulse consisting of primary sub-waves ① -② -③ -④ and ⑤.

With the first four parts of this 5-wave impulse fully completed, impulse ⑤ is still under construction.

Taking into account the structure and proportions, we could expect primary wave ⑤ to be equal to ③. This would send the SPX near 3319.4

Another view differs a little from the main projection.

According to this alternative, we are still expecting primary ⑤ to complete higher. However, the target, in this case, is higher, near 3290.6.

This level would bring wave ⑤ at the 78.6% Fibo of primary ③ range.

After the last wave, wave ⑤, we could see a bearish trend starting, or a deep correction weighing on.

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Market Sentiment Picks Up After Muted Iran Response

Equity markets resumed the rally following Iran’s response to the US attacks.

Investors remain hopeful that the tensions will not escalate too far.

This has resulted in the precious metal retreating amid a surge in risk appetite. Investors are also looking forward to this week’s payroll report.

Germany Factory Orders Slip in November

The latest factory orders in Germany saw a decline. Industrial orders fell 1.3% on the month beating forecasts of a 0.2% increase and a decline from 0.2% previously.

Trade balance figures from France were also weaker.

EURUSD Testing the Rising Trend Line

The common currency is currently testing the rising trend line. After the break down below the support level of 1.1131, this will be the next dynamic support. In the event of a break down below this trend line, the lower support at 1.1100 will be open for a retest. This potentially confirms the downside below 1.1131.

Sterling Under Pressure on Rising Dollar Strength

The pound is trading weaker amid a broader strength in the US dollar. The USD is rising for the second consecutive day. Economic data from the UK remains sparse in the meantime. Still, Brexit continues to remain the biggest risk for investors.

GBPUSD Forming into a Descending Triangle

The GBPUSD currency pair is currently threatening the 1.3100 level of support. If support breaks, we expect accelerated declines further. The minimum downside is at 1.2960. Alternately, to the upside, price action will need to break the minor falling trend line for any hopes of an upside bounce.

Gold Prices Fall as Risk Appetite Improves

The precious metal is retreating after a strong rally in the commodity. Falling tensions have made the safe haven less appealing. This would potentially mark a decline in gold prices. However, given the fact that there is potential for the middle east tensions to rise, it is possible that gold prices could snap back.

XAUUSD Could Post Declines in the Near Term

XAUUSD is posting declines and this is likely to see a retest of the previous lows near 1557.76. If this support breaks then prices could slip further. The next main support is at 1534.10. The upside bias remains as long as prices are supported above this level.

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Bearish EIA Report Hits Oil Prices

Inventories Climb

Crude prices have moved sharply lower into the back end of the week following the latest report from the Energy Information Administration.

Despite the API reporting a large build in US crude stores, the EIA showed that in the week ending January 3^rd, US crude stores were higher by 1.2 million barrels over the week. This takes the total inventory level back up to 431.1 million barrels. The reading was in stark contrast to the expected 3.6 million barrel decrease the market was looking for.

Despite the increase in total inventories, crude stores at the Cushing delivery hub in Oklahoma, the largest site in the US, were lower by over 800k barrels on the week.

Refinery crude runs were also lower over the week by 368k barrels. This marked a 1.5% fall in refinery utilization rates.

Gasoline & Distillate Inventories Higher

Elsewhere, the report showed that US gasoline inventories were also higher last week. They rose by 9.1 million barrels, taking the total inventory level to 251.6 million barrels. This was far higher than the 2.7 million barrel increase the market was looking for.

The report also showed that distillate stockpiles were higher over the week. Distillate inventories, which include diesel and heating oil, were higher by 5.3 million barrels. The result took the total inventory level in distillates up to 139 million barrels. This again was far higher than the 3.9 million barrel increase projected by analysts.

Finally, the report showed that net US crude imports were higher by 1.78 million barrels over the week.

US/Iran Tensions Impacting Crude

Its been a volatile week for crude prices given the initial upside surge seen in response to news of an escalation in tensions between the US and Iran.

Following the US killing of a top Iranian general last week, Iran finally retaliated overnight on Wednesday with missile attacks on two US army bases in Iraq.

The attack fuelled a sudden wave of risk aversion across markets that saw equities cratering lower while safe havens rallied.

Crude was higher too, initially. However, it has since reversed sharply lower from highs above 64. As yet, no US retaliation has been enacted. But, the market is waiting to see how America will respond.

Any further action could see crude prices sharply higher once again.

Technical Perspective

The reversal lower in crude has taken price back under the 63.13 level. Price is quickly approaching the broken bearish trend line where we also have structural support at the 60 level. While above here, further upside remains likely. Back under here, however, will put focus on a move to deeper support at the 57 level.

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