Gold Shrugs as US Services PMI Beats Expectations

Gold has posted small gains in the Monday session. In North American trade, the spot price for an ounce of gold is $1335.14, up 0.15% on the day. On the release front, the ISM Non-Manufacturing PMI climbed to 59.9, above the forecast of 56.5 points. This points to strong expansion in the services sector and marked a 3-month high. On Tuesday, the US releases JOLTS Job Openings.

On Friday, US employment numbers were strong, propelling the dollar to broad gains, including against gold, which dropped 1.2%. Nonfarm payrolls jumped to 200 thousand, beating the estimate of 181 thousand. Wage growth remained steady at 0.3%, edging above the estimate of 0.2%. Will the strong numbers lead to additional interest rate hikes? Minneapolis Fed President Neel Kaskkari said on Friday that the Fed might need to be more aggressive if wages continued to move higher. The Fed is planning to raise rates three times in 2018, but some economists are forecasting four hikes.

The Janet Yellen era is over at the Federal Reserve. On the weekend, Jerome Powell took over as chair, replacing Yellen. On Friday, Yellen waxed optimistic about the economy, saying that strong growth, a red-hot labor market and increased wage growth would require the Fed to gradually raise interest rates. Powell is expected to continue to Yellen’s policies, so the markets are not expecting any dramatic shifts. However, the massive US tax cut will have a strong impact on the US economy, and the markets will be looking to the Fed for guidance. If the Fed sounds optimistic about the tax reform package, the US dollar could move higher.

 

XAU/USD Fundamentals

Monday (February 5)

  • 9:45 US Final Non-Manufacturing PMI. Estimate 53.3. Actual 53.3
  • 10:00 US ISM Non-Manufacturing PMI. Estimate 56.5. Actual 59.9
  • Tentative – US Loan Officer Survey

Tuesday (February 6)

  • 10:00 US JOLTS Jobs Openings. Estimate 5.95M

*All release times are GMT

*Key events are in bold

 

XAU/USD for Monday, February 5, 2018

XAU/USD February 5 at 12:40 EST

Open: 1333.08 High: 1338.66 Low: 1329.05 Close: 1335.14

 

XAU/USD Technical

S3 S2 S1 R1 R2 R3
1260 1285 1307 1337 1375 1416
  • XAU/USD showed little movement in the Asian session and posted gains in European trade. In North American trade, the pair edged lower but has recovered
  • 1337 is providing support
  • 1375 is the next line of resistance
  • Current range: 1337 to 1375

Further levels in both directions:

  • Below: 1337, 1307, 1285 and 1260
  • Above: 1375, 1416 and 1433

OANDA’s Open Positions Ratio

XAU/USD ratio is unchanged in the Thursday session. Currently, short positions have a majority (59%), indicative of trader bias towards XAU/USD reversing directions and moving lower.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Dollar Rebounds After Strong Jobs Report

US added 200,000 positions in January

The US dollar rose against major pairs on Friday. The release of the U.S. non farm payrolls (NFP) proved to be the much needed shot in the arm after the greenback was under pressure for most of 2018. The job gains were above expectations but more importantly the hourly wages came in higher, giving the Fed a potential green light to hike 3 or 4 times in 2018. The market is estimating a 77.5 percent probability of the first rate lift to come in March.

  • The Reserve Bank of Australia (RBA) will publish its rate statement on February 5
  • the Reserve Bank of New Zealand (RBNZ) will follow on February 7
  • The Bank of England (BoE) will host a super Thursday on February 8

USD surged after wages rose more than expected



The EUR/USD gained 0.22 percent in the last five days. The single currency is trading at 1.2424. The USD was having a week to forget but a jobs week is not done until the U.S. non farm payrolls (NFP) report is released. The gain of 200,000 jobs in January was the boost the dollar needed after the Fed and the ADP did now sway the market. The USD reversed most of the losses of the week, gaining 0.43 percent against the EUR. The biggest boost came from the hourly wages growth at 0.3 percent for an annualized gain of 2.9 percent.

The disappointing December jobs report played a part as investors were estimating 180,000 positions and instead got pleasantly surprised by both strong gains and positive inflation signals. The move in the USD could be under threat next week as there are few economic released of note in the US and the political drama in Washington has not been beneficial to the greenback.

Fundamentals indicators and monetary policy has been supportive of the USD, but political uncertainty has hurt the dollar’s status as a reserve currency. The upgraded growth expectations around the world have also shrunk the gap between the US and the rest of the world.



The GBP/USD lost 0.31 percent during the trading week. The currency pair is trading at 1.4120 ahead of the Bank of England (BoE) monetary policy meeting on Thursday, February 8 at 7:00 am EST. The central bank is not expected to change its benchmark rate but it could signal a hike sooner rather than later specially as expectations of a softer Brexit and economic growth has been encouraging. The BoE made its first rate rise in a decade back in November. The data released on Super Thursday, so called because of the sheer number of announcements, will guide the market and shape the monetary policy expectations going further into 2018.


Canadian dollar weekly graph January 29, 2018

The USD/CAD gained o.86 percent during the week. The currency pair is trading at 1.2421. The USD appreciated against the loonie and put the Canadian currency at weekly lows. The greenback rose 1.22 versus the CAD on Friday after the release of the U.S. non farm payrolls (NFP). The U.S. Federal Reserve meeting and positive employment numbers earlier in the week did little for the USD, but with the release of the biggest indicator it all turned.

The economic data releases form Canada will start with on Tuesday, February 6 at 8:30 EST with publication of the trade balance. Later that same day the Ivey Purchasing Managers Index will be posted at 10:00 am EST. Employment data will be the highlight of the week on Friday, February 9 at 8:30 am with a 2,000 job loss report expected after the back to back gains of 70,000 positions in the previous months.

Market events to watch this week:

Monday, February 5
4:30am GBP Services PMI
10:00am USD ISM Non-Manufacturing PMI
7:30pm AUD Retail Sales m/m
7:30pm AUD Trade Balance
10:30pm AUD Cash Rate
10:30pm AUD RBA Rate Statement
Tuesday, February 6
8:30am CAD Trade Balance
4:45pm NZD Employment Change q/q
NZD Unemployment Rate
Wednesday, February 7
10:30am USD Crude Oil Inventories
3:00pm NZD Official Cash Rate
3:00pm NZD RBNZ Monetary Policy Statement
3:00pm RBNZ Rate Statement
4:00pm NZD RBNZ Press Conference
Thursday, February 8
4:00am AUD RBA Gov Lowe Speaks
7:00am GBP BOE Inflation Report
7:00am GBP MPC Official Bank Rate Votes
7:00am GBP Monetary Policy Summary
7:00am GBP Official Bank Rate
7:30pm AUD RBA Monetary Policy Statement
Friday, February 9
4:30am GBP Manufacturing Production m/m
8:30am CAD Employment Change
8:30am CAD Unemployment Rate

*All times EDT
For a complete list of scheduled events in the forex market visit the MarketPulse Economic Calendar

Gold Ticks Lower, Investors Eye Nonfarm Payrolls

Gold has posted small losses in the Thursday session. In North American trade, the spot price for an ounce of gold is $1343.22, down 0.14% on the day. On the release front, employment data was positive, as unemployment claims dropped to 230 thousand, below the forecast of 237 thousand. ISM Manufacturing PMI slowed to 59.1, but still beat the estimate of 58.7 points. ISM Manufacturing PMI slowed to 59.1, but still beat the estimate of 58.7 points. On Friday, the spotlight will be on employment numbers, with the release of wage growth, nonfarm payrolls and the unemployment rate. As well, the US releases UoM Consumer Sentiment.

As expected, the Federal Reserve held the course on interest rate policy at its January meeting on Wednesday. In the rate statement, policymakers said that they expected the economy to continue to expand at a moderate pace and that the labor market would remain strong in 2018. What was more noteworthy was that the Fed predicted that inflation would rise to the Fed’s 2 percent target this year. This marks an upgrade in the inflation forecast, as the December statement said that inflation was expected to “remain somewhat below 2 percent.” Higher inflation is likely to open the door to tighter monetary policy, and the Fed appears on track for three or even four rate hikes in 2018, assuming that the US economy remains strong. This policy meeting was the last under Janet Yellen, as Jerome Powell will take over as Fed chair on February 3. The slightly hawkish tone of the rate statement has raised the odds of a rate hike to 83% when the Fed next meets in March.

Gold posted gains last week, taking advantage of a USD sell-off. However, the dollar has steadied this week, and gold prices are slightly lower. Since the start of the year, gold is up 2.2%, joining the major currencies which have posted gains against the greenback in 2018. This has been somewhat of a surprise, as the robust US economy has supported risk appetite, yet gold has not lost its luster early in 2018. Last week, gold climbed to $1366, its highest level since August 2016.

 

XAU/USD Fundamentals

Thursday (February 1)

  • 7:30 US Challenger Job Cuts. Actual -2.8%
  • 8:30 US Preliminary Nonfarm Productivity. Estimate +0.8%. Actual -0.1%
  • 8:30 US Preliminary Unit Labor Costs. Estimate 0.9%. Actual 2.0%
  • 8:30 US Unemployment Claims. Estimate 237K. Actual 230K
  • 9:45 US Final Manufacturing PMI. Estimate 55.5. Actual 55.5
  • 10:00 US ISM Manufacturing PMI. Estimate 58.7. Actual 59.1
  • 10:00 US Construction Spending. Estimate 0.4%. Actual 0.7%
  • 10:00 US ISM Manufacturing Prices. Estimate 68.3. Actual 72.7
  • 10:30 US Natural Gas Storage. Estimate -102B. Actual -99B
  • All Day – US Total Vehicle Sales. Estimate 17.2M

Friday (February 2)

  • 8:30 US Average Hourly Earnings. Estimate 0.2%
  • 8:30 US Nonfarm Employment Change. Estimate 181K
  • 8:30 US Unemployment Rate. Estimate 4.1%
  • 10:00 US Revised UoM Consumer Sentiment. Estimate 95.0

*All release times are GMT

*Key events are in bold

 

XAU/USD for Thursday, February 1, 2018

XAU/USD February 1 at 12:30 EST

Open: 1349.76 High: 1352.12 Low: 1352.50 Close: 1343.22

 

XAU/USD Technical

S3 S2 S1 R1 R2 R3
1285 1307 1337 1375 1416 1433
  • XAU/USD showed little movement in the Asian session. The pair posted slight losses in European trade, but has recovered most of these losses in North American trade
  • 1337is providing support
  • 1375 is the next line of resistance
  • Current range: 1337 to 1375

Further levels in both directions:

  • Below: 1337, 1307, 1285 and 1260
  • Above: 1375, 1416 and 1433

OANDA’s Open Positions Ratio

XAU/USD ratio is unchanged in the Thursday session. Currently, short positions have a majority (59%), indicative of trader bias towards XAU/USD reversing directions and moving lower.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

USD/CAD Canadian Dollar Higher After Strong GDP and Persistent USD Weakness

The Canadian dollar is higher on Wednesday after the economy accelerated its growth in November. Canadian GDP is posted monthly and showed a gain of 0.4 percent in November. The Canadian economy started 2017 with a bang which led the Bank of Canada (BoC) to raise rates twice before a slowdown in the third quarter. The two 25 basis points rate hikes, the overall strength of the economy, recovery energy prices and a soft US dollar continued to boost the loonie. In 2018 the BoC has hiked once more leaving the benchmark rate at 1.25 percent.

The Canadian currency has enjoyed a strong start to 2018 and is more than 2 percent higher than the USD year to date. The political uncertainty in the US that delayed pro-growth policies until the end of 2017 remain. The fate of NAFTA has kept the Canadian dollar under pressure as the end of the original timeline fast approaches. The negotiations have shown little progress and with only two rounds to go, the end result could be all parties walking away empty handed. Elections in Mexico and the United States this year will further complicate negotiating in such a divisive topic as trade.


usdcad Canadian dollar graph, January 31, 2018

The USD/CAD lost 0.24 percent on Tuesday. The currency pair is trading at 1.2304, a four month high, after the release of the monthly gross domestic product in Canada for November. The 0.4 percent gain is the biggest gain since May 2017 and a signal that growth is back on track after a slowdown in the third quarter.

The U.S. Federal Reserve kept its benchmark interest rate at 1.25 – 1.50 percent on Wednesday. The meeting will mark the last time for Janet Yellen as Chair of the central bank. Jerome Powell will take over next week and with no meeting scheduled for February the Fed is expected to lift rates in March to mark the start of the Powell era.

Prime Minister Justin Trudeau told the CBC earlier that he does not think the US will pull out of NAFTA. The PM is aware that it is a possibility and his government is working on contingency plans. Also today US Secretary of Commerce Wilbur Ross said that the renegotiations are far from being completed at this point. He did recognize that progress has been made, but very little of it in the hard issues.

During his first State of the Union address President Trump mentioned that the US had entered into unfair trade deals and his goal was to turn that page on that period. Pro-growth policies were late to arrive, but after the tax reform gave Trump his first policy victory he intends to build on it by proposing a 1.5 trillion dollar infrastructure spending legislation.


West Texas Intermediate graph

Oil prices are recovering from a drop earlier in the session. West Texas Intermediate is trading at $64.55. The weekly US crude inventories report by there Energy Information Administration (EIA) surged by 6.8 million barrels. The forecast was a mild 100,000 barrels, but it appears the cold weather has slowed down refineries in the south resulting in the buildup. The surprise to the upside was balanced with a larger than expected drawdown of gasoline stockpiles.
Market events to watch this week:

Thursday, February 1
4:30am GBP Manufacturing PMI
10:00am USD ISM Manufacturing PMI
Friday, February 2
4:30am GBP Construction PMI


*All times EST
For a complete list of scheduled events in the forex market visit the MarketPulse Economic Calendar

DoubleLine CEO Says Weak USD Good for Commodities

There’s good news ahead for commodities, with a particular bet on metals, as the outlook for the dollar looks to stay grim, according to experts.

DoubleLine CEO Jeffrey Gundlach made a call for commodities during a webcast Tuesday, during which he predicted commodities would soon outperform stocks. This correlates with the weakness of the dollar, which in the last week hit its lowest levels in more than three years.



“Usually when you get a bad year in the dollar, it’s followed by one or two more bad years,” Gundlach said.

Analysts speaking to CNBC agreed, noting that the euro’s strength and broad-based global growth will also buoy commodities through 2018.


West Texas Intermediate graph

“It’s absolutely true that even though in the course of 2017 the correlation between oil commodities generally, and the dollar, has weakened, it is still a very very big driver. And the causality really goes from the dollar, to commodity prices,” said Sabine Schels, the head of fundamental commodities research at Bank of America Merrill Lynch.

Oil prices are still on track for a fifth monthly gain, despite U.S. crude slipping this week amid a sell-off in both stocks and commodities.

Copper, palladium, and more recently platinum and gold have all seen a pickup in the last three months following the more pervasive dollar weakness. This is a huge relief for commodities exporters, particularly across many natural resource-dependent countries in South America and Africa, which saw their economies tank when commodity prices plummeted in 2015.

via CNBC

Oil Analyst Warns of Speculative Bubble

If the man who called the 2015 crude collapse is right, the oil market could be the next area to see a sharp pullback.

Oil, which is seeing its best start to a year since 2006, has entered a danger zone, according to Tom Kloza of the Oil Price Information Service.

Kloza, the firm’s global head of energy analysis, made the call on CNBC’s “Futures Now” on Tuesday just as Wall Street was coping with the stock market’s worst day since last August.


West Texas Intermediate graph

“There’s some collateral damage from the stock market right now. I don’t believe this is the bloodletting that’s due because of the tremendous speculative bubble and the money on the crude oil side,” Kloza said. “That will come at a later date.”

That day could be just weeks away, due to changing demand dynamics and “swelling” global markets, he added.

“All of the demand growth, all of it, is overseas. It’s not in the United States,” he said. “My sense is that global markets give back some of these very, very robust financial gains.”

Brent oil has soared 97 percent and WTI crude prices are up nearly 90 percent over the past two years. Right now, Brent is trading around $68 a barrel and WTI is bouncing around $64.

via CNBC

Oil Mixed After Surprise Drawdown in US Oil Inventories

Oil prices fell on Wednesday for a third day, after the U.S. Energy Department said oil inventories rose for the first time in nearly three months, though crude futures remained on track for the fifth straight month of gains.

U.S. oil inventories rose 6.8 million barrels in the week to Jan. 26, after 10 straight weeks of declines, which had dropped supply to its lowest levels since early 2015.

The increase far exceeded expectations for a rise of 126,000 barrels. Analysts noted that refiners have been cutting activity while U.S. crude production has kept rising.

Oil prices faded immediately after the news, then retraced some losses when the data showed a surprising 2 million-barrel drawdown in gasoline stocks, suggesting demand for products may be enough to limit seasonal inventory buildup.


West Texas Intermediate graph

U.S. crude futures were down 42 cents to $64.08 a barrel, a drop of 0.6 per cent as of 11:13 a.m. EST (1613 GMT), after hitting a low of $63.92 shortly after the release. Brent crude dropped 39 cents to $68.63 a barrel, a 0.6 per cent decline.

“Strong demand in the major refined products categories is supporting the entire petroleum complex after the data release,” said David Thompson, executive vice-president at Powerhouse, an energy-specialized commodities broker in Washington.

March U.S. gasoline futures dipped 0.1 per cent to $1.8828 a gallon.

“If this week’s drop is due to weather-related, unplanned incidents it may not yet herald the onset of turnaround season. However, those days are rapidly approaching,” Thompson said.

The U.S. Energy Information Administration said production rose to 9.92 million bpd, close to the country’s record output of 10.04 mln bpd set in 1970.

Production is expected to hit 11 million bpd by 2019. This week ExxonMobil said it is wants to triple its production in Texas’ Permian Basin to 600,000 bpd within seven years.

via Globe and Mail

Could WTI reach USD 70.00 per barrel ?

By Sara Israfilbayova

From a fundamental perspective, the continuous fall in the U.S. oil inventories is driving market given the positive global growth narrative, Stephen Innes, Head of FX Trading for OANDA told Azernews.

The expert said that oil markets were at the epicentre of volatility with WTI breaking the $ 66.00 per barrel market and marking the highest close since December 2014.

“It’s conceivable we could top $70 on WTI, but of course, Baker Hughes delivering a convincing signal that we should expect more U.S. rigs to come back online the closer we get to $70 per barrel after BH reported that 12 new wells came back online,” Innes stressed.

“But let’s not lose sight of the U.S. dollar follies, which are underpropping oil markets and providing the bounce to all commodity markets,” he stressed.

The expert went on to say that since we may only be in the early stages of the U.S. dollars demise, and when aggregated with the oil markets OPEC induced positive developments, the market could press significantly higher from increasing sensitivity and stronger correlations to the U.S. dollar alone.

“Structurally, the dollar can push much lower as signs are developing that we may be in the early stages of a multi-year secular bear market,” Innes mentioned.

Traders continue to look over their shoulder at the likelihood of U.S. oil production ramps and supporting that argument; Baker Hughes reported the number of active U.S. rigs rose by 12 to 759.

Further, the expert noted that last week was ended by singing a very familiar tune with U.S. equities putting in another strong performance, helped by more positive corporate earnings reports, while the USD weakened further, as the market was still digesting the aftershocks from the verbal ping-pong match when both Mnuchin and Trump dabbled into the FX debate.

“We should expect more two-way uncertainty entering the fray this week which could make for some touch and go moments, but for now, the markets remain comfortable to maintain a longer-term soft USD bias,” Innes added.

Meanwhile, as of January 31, Brent crude futures are down 0.69 cents, or about 1 percent, at $68.33 a barrel, while U.S. West Texas Intermediate (WTI) futures are down, 67 cents, or 1 percent, at $63.83

 

Azernews.

Gold Trading Sideways Ahead of Fed Rate Statement

Gold has ticked lower in the Tuesday session. In North American trade, the spot price for an ounce of gold is $1339.51, down 0.13% on the day. On the release front, CB Consumer Confidence rose to 125.4, above the estimate of 123.2 points. Later on Tuesday, President Trump will deliver his State of the Union address before Congress. On Wednesday, there are a host of key indicators in the US, led by ADP Nonfarm Employment Change. The Federal Reserve will release a monetary policy statement, with the markets expecting the benchmark rate to remain unchanged at a range between 1.25%-1.50%.

Gold took advantage of last week’s USD selloff, but the dollar has steadied this week. Gold moved higher earlier on Tuesday, but these gains were mostly wiped out after a superb consumer confidence report. CB Consumer Confidence continues to move upwards, as the US consumer is showing strong optimism about the economy. This has triggered stronger consumer spending, which led to a surge of imports in Q4, weighing on GDP, which was softer than expected at 2.6%.

All eyes are on the Federal Reserve, which will make a rate announcement on Wednesday, the final one under Janet Yellen’s watch. The tone of the rate statement could affect investor sentiment and have an impact on gold prices. It’s a virtual certainty that the Fed will leaves rates unchanged this time around, although it’s likely that the Fed will raise rates by a quarter-point at the March meeting. Yellen will make way for Jerome Powell, who takes over as chair in early February. Powell is expected to hold the course on monetary policy, which was marked by small, incremental interest rates in order to keep the robust US economy from overheating.

 

XAU/USD Fundamentals

Tuesday (January 30)

  • 9:00 US S&P/CS Composite-20 HPI. Estimate 6.3%. Actual 6.4%
  • 10:00 US CB Consumer Confidence. Estimate 123.2. Actual 125.4
  • 21:00 President Trump Speaks

Wednesday (January 31)

  • 8:15 US ADP Nonfarm Employment Change. Estimate 191K
  • 8:30 US Employment Cost Index. Estimate 0.5%
  • 9:45 US Chicago PMI. Estimate 64.3
  • 10:00 US Pending Home Sales. Estimate 0.5%
  • 14:00 US FOMC Statement
  • 14:00 US Federal Funds Rate. Estimate <1.50%

*All release times are GMT

*Key events are in bold

 

XAU/USD for Tuesday, January 30, 2018

XAU/USD January 30 at 13:00 EST

Open: 1349.77 High: 1352.50 Low: 1334. Close: 1338.60

 

XAU/USD Technical

S3 S2 S1 R1 R2 R3
1285 1307 1337 1375 1416 1433
  • XAU/USD posted losses in the Asian session. XAU/USD recovered and moved higher in European trade. The pair has given up most of these gains in North American session
  • 1337 was tested earlier in support and is under pressure
  • 1375 is the next line of resistance
  • Current range: 1337 to 1375

Further levels in both directions:

  • Below: 1337, 1307, 1285 and 1260
  • Above: 1375, 1416 and 1433

OANDA’s Open Positions Ratio

XAU/USD ratio is showing little movement in the Tuesday session. Currently, short positions have a majority (57%), indicative of trader bias towards XAU/USD continuing to lose ground.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.