Equity markets across the board are responding to China trade news but there is also a sense of short covering. Gold sees profit taking today. Bill Baruch, president and founder of Blue Line Futures, previews E-mini S&P, Gold, Crude, Forex.
Bill Baruch’s FX Rundown for Dec. 3-4 short video here.
Despite flash crash/surge moves in the Aussie & yen Wednesday night, fireworks have yet to come. Bill Baruch breaks down what Friday's data deluge means for USD, euro, yen, Aussie & CAD.
E-mini S&P (March)
Thursday’s close: Settled at 2447.75, down 63.25.
Fundamentals: Risk-sentiment is broadly better this morning and global equity markets are recovering from a painful session Thursday on technicals (discussed in Technical section below), news that China will cut its RRR and that the U.S. and China will hold trade talks next week. The People’s Bank of China announced they will cut rates across the board for the first time since March 2016 in order to stimulate their slipping economy. The cut will take effect on January 15. Additionally, lower level trade representatives from the U.S. and China will begin meeting Monday with hopes to lay groundwork for heightened talks later this month.
Equity markets across the board are responding to the news but there is also a sense of short covering ahead of Nonfarm Payroll and a panel discussion with Fed Chair Powell and his two predecessors at 10:15 am EDT.
For instance, the German DAX is up 1.7% this morning despite Eurozone Markit Composite PMI coming in below expectations and at the lowest level since November 2014. Thursday, ISM Manufacturing in the U.S. whiffed largely and came in at the worst level since November 2016. For now, and ahead of today’s economic calendar, a small sense of positivity is lending a big hand.
Wage growth will be the key component for today’s Nonfarm Payroll report and Average Hourly Earnings are expected to come in at +0.3%, annualized at 3.0%. Stronger growth will likely weigh on equity markets as it reinvigorates the Fed’s path of tightening. In fact, the CME FedWatch Tool is pricing in a 92.7% chance that they leave rates unchanged in March. Furthermore, there is a 0% chance they hike in March with a 7.1% chance they actually cut rates 25 bps and 0.1% chance they cut 50 bps (as of Thursday’s close and before this overnight jump in markets, there was a 14% chance the Fed cut 25 bps in March).
Reuters: Traders keep bets Friday on no Fed rate hikes in 2019.
Expectations for job growth are 178,000, but given Thursday 271k posted by ADP, we need to see at least 200k in order to keep a belief that the economy is rolling along, especially on the heels of that ISM Manufacturing number.
Technicals: Here Thursday, we had only one level of strong support sitting nearly 2% below the market and that held. This major three-star level at ...
Crude Oil (February)
Thursday’s close: Settled at 47.09, up 0.55.
Fundamentals: Crude Oil is at the highest level since December 19 and finding a tailwind from the stimulus out of China and the hopes of substance from next week’s trade talks. We have been pounding the table that broad risk-sentiment is crucial for Crude in a recovery and this morning things are favorable.
Most notably though, Crude did hold ground very well given the poor close in equity markets but did trade lower after API inventory data showed massive growth in product supplies; -4.5 mb Crude, +8.0 mb Gasoline and +4.0 mb Distillates The official EIA data is out and the expectations are for -3.086 mb Crude, +1.967 mb Gasoline and +1.633 mb Distillates. A report that is merely in line with these expectations and doesn’t show a large increase in estimated production leaves an opening for Crude to have a more bullish report than last night’s API and the caveat is that the market is already higher given the news surrounding China and trade.
Remember though, traders must keep an eye on overall risk-sentiment given today’s Nonfarm Payroll and Fed speak; a stronger dollar will act as a severe headwind.
Technicals: Price action settled right at our major three-star resistance of ...
Gold (February)
Thursday’s close: Settled at 1294.8, up 10.7.
Fundamentals: Gold traded to $1300 overnight for the first time since June but its backing away on profit-taking Friday morning as Nonfarm Payroll and Fed speak come into the cross hairs.
We have advised that you do not want to chase this move and it is extremely important to lock in gains ahead of today’s data. Expectations are for Average Hourly Earnings to increase 0.3% and job growth to come in at 178k. The key number is Average Hourly Earnings and a stronger read will send Gold lower, but we maintain that dips are buying opportunities.
If Gold sells off after Nonfarm, we could see a window ahead of Fed Chair Powell’s panel with his two predecessors to buy the dip. Contact our trade desk at 312-278-0500 to discuss.
Technicals: Price action is testing major three-star resistance head-on, we prefer to capitalize on strength and not manage a move on weakness. In fact, Gold is trading below our momentum indicator this morning which comes in at 1294. Instead, we are looking to dips as a buying opportunities and first key support comes in at ...
