The rally in Gold looks unstoppable as many
positive drivers keep pushing the price to new highs. Gold is correlated with
real yields and those kept on falling lately due to weakening US data that led
to a fall in inflation expectations and Treasury yields. The market might have
gone too far too fast though as the rates pricing has reached five cuts in
2024, although they can easily increase if the data worsens even more. The bias
remains bullish, and the dips will likely be bought strongly, but watch out for
a quick deterioration in the data not followed by a strong Fed reaction as that
could make real yields to spike higher and weigh on Gold like it happened in
the recent two recessions.

Gold Technical Analysis –
Daily Timeframe

On the daily chart, we can see that Gold today
spiked higher in the APAC session amid low liquidity. The move got completely
reversed soon after with a very ugly reversal candlestick that might be a bad
omen for the buyers. Such extreme moves usually happen around short term tops and bottoms,
so the buyers might want to wait for at least a pullback into the trendline
before piling in again

Gold Technical Analysis – 4
hour Timeframe

On the 4 hour chart, we can see that we have
another minor trendline around the 2040 level. The buyers could split their
position in half to enter both at the minor and major trendline as we cannot
know which level will hold. The sellers, on the other hand, should pile in at
every break lower with a break below the major trendline likely triggering a
selloff into the 1930 level.

Gold Technical
Analysis – 1 hour Timeframe

On the 1 hour chart, we can see more
closely the current price action with the big spike followed by the huge
reversal. At the moment, there’s not much to do as the price is basically in no
man’s land and both buyers and sellers should wait for the market to come into
the key levels before taking new positions. A lot will depend on the economic
data this week as we get many top tier US labour market indicators, so keep a
close eye on the data.

Upcoming Events

This week we will see lots of US labour
market data culminating with the NFP release on Friday. Tomorrow, we have the
ISM Services PMI and the US Job Openings reports. On Wednesday, we will get the
US ADP data. On Thursday, it will be the time for the US Jobless Claims
figures, while on Friday we conclude the week with the NFP report. The playbook
should continue to be the same with weak data boosting Gold and strong figures
leading to pullbacks.

This article was written by FL Contributors at www.forexlive.com.

UPCOMING EVENTS:

• Monday:
  Switzerland CPI.
• Tuesday: Tokyo
  CPI, China Caixin Services PMI, RBA Policy Decision, Eurozone PPI, Canada
  Services PMI, US ISM Services PMI, US Job Openings.
• Wednesday:
  Australia GDP, Eurozone Retail Sales, US ADP, BoC Policy Decision.
• Thursday: China
  Trade data, Switzerland Unemployment Rate, US Challenger Job Cuts, US
  Jobless Claims.
• Friday: Japan
  Wage data, US NFP, University of Michigan Consumer Sentiment.

Monday

The Swiss CPI Y/Y is expected to remain
unchanged at 1.7% vs. 1.7% prior,
while the M/M measure is seen at -0.1% vs. 0.1% prior. The inflation rate in
Switzerland has been in the SNB’s 0-2% target for a long time for both the
headline and core measures. The central bank is unlikely to hike even if we
get a small beat as the data might be distorted due to temporary rent and
energy price increases.

Tuesday

The RBA is expected to keep the cash rate
unchanged at 4.35% after they hiked
by 25 bps in November. RBA’s Governor
Bullock has kept a hawkish tone recently as the central bank is now more
worried about inflation expectations getting out of hand. The data, on the
other hand, has been mixed but skewed towards weakness as the PMIs
fell further into contraction and the Monthly
CPI missed expectations across the board,
although the Trimmed Mean measure fell by just 0.1%.

The US ISM Services PMI is expected to
increase to 52.0 vs. 51.8 prior.
The recent S&P
Global Services PMI beat expectations, but
the most notable take from the report was the line saying that “as a result
of subdued demand and decreasing backlogs, companies reduced their workforce
for the first time since June 2020, affecting both service providers and
goods producers. Cost pressures eased, with input prices rising at the
slowest rate in over three years”.

The US Job Openings is expected to fall to
9.350M vs. 9.553M prior.
The labour market has been showing clear signs of weakening lately and
despite the volatility in Job Openings, the trend is self-explanatory. This
will be the first major US labour market report for the week and it’s highly
likely that it will be market moving.

Wednesday

The US ADP is expected to show 128K jobs
added in November compared to 113K in
October. The market at the moment is more
focused on the labour market weakness, so a strong report might trigger
some reaction but it’s likely to be reversed soon after as the market will look
forward to the NFP release.

The BoC is expected to keep interest rates
steady at 5.00% vs. 5.00% prior.
This move is supported by the recent Governor
Macklem’s comments where he said
that “interest rates may now be restrictive enough” and the CPI
report where all the figures
fell further, especially for the underlying
inflation measures, which is what the BoC is most focused on. Moreover, last
week’s labour
market report, despite being good,
showed another increase in the unemployment rate.

Thursday

The US Jobless Claims continue to be one
of the most important releases every week as it’s a more timely indicator on
the state of the labour market. Initial Claims keep on hovering around cycle
lows, which shows us that layoffs have not yet picked up notably, but
Continuing Claims are now rising at a fast pace and that’s indicative of people
finding it harder to get another job after being laid off. This week the
consensus sees Initial Claims at 223K vs. 218K prior,
while there’s no estimate at the time of writing for Continuing Claims,
although the last week’s number was 1927K vs. 1841K prior.

Friday

The US NFP is expected to show 175K jobs
added compared to 150K in
October and the Unemployment Rate to remain
unchanged at 3.9%. The culprit for the pickup in growth is expected to be
attributed to the end of the United Auto Workers strikes in October which
weighed on the Manufacturing payrolls in the prior report.

The Average Hourly Earnings Y/Y is
expected to cool further to 4.0% vs. 4.1% prior, while the M/M measure is seen
ticking up to 0.3% vs. 0.2% prior. As a reminder, the last report missed
expectations across the board with all measures pointing to weakness like the
increase in the unemployment rate and the decrease in average weekly hours
worked.

There’s been lots of chatter on the Sahm
Rule Indicator lately, so let’s see
what’s that about. The Sahm Rule Indicator signals the start of a recession
when the three-month moving average of the national unemployment rate (U3)
rises by 0.50 percentage points or more relative to the minimum of the
three-month averages from the previous 12 months. The minimum three-month
average from the previous 12 months is at 3.5%, so we will need a spike to 4.3%
in the next report to bring the three-month average to 4.0% and reach the 0.50
threshold. With such a spike though, we won’t need to look at the indicator to
conclude that a recession might have already started.

The University of Michigan Consumer
Sentiment is expected at 61.8 vs. 61.3 prior.
This indicator measures how the consumers see their personal finances
compared to the Consumer Confidence which is more weighted towards the labour
market outlook. It’s been falling steadily since June while inflation
expectations spiked higher in the recent couple of months despite the huge drop
in gasoline prices. Nevertheless, the NFP will overshadow this report, so it could
be market moving only if it’s in line with the NFP release.

This article was written by Giuseppe Dellamotta at www.forexlive.com.

Here’s a great chart from BMO showing the consistent jobs growth in the establishment survey compared to the household survey showing net job losses since June.

On both charts, BMO highlights the slowing trend.

On a 6-month moving
average basis, this dragged the household survey’s payrolls growth to just 32k,
and even the establishment survey’s 6-month moving average has slipped to
effectively its lowest level since the pandemic. It’s no secret that labor is the
benchmark lagging indicator, and as such, the trend in hiring holds marginally
more weight than the outright level for monetary policymakers.

The latest jobs report is due Friday, December 8.

This article was written by Adam Button at www.forexlive.com.

• Powell: FOMC is ‚moving forward carefully‘ as risks around rates becoming more balanced
• Powell Q&A: Inflation is still well-above target but moving in the right direction
• US November ISM manufacturing PMI 46.7 vs 47.6 expected
• Canada November employment +24.9K vs +15.0K expected
• Gold touches an all-time high at $2075
• Atlanta Fed Q4 GDPNow 1.2% vs 1.8% prior
• Baker Hughes US oil rig count 505 vs 500 prior
• Fed’s Goolsbee: Inflation is coming down exactly as we want
• US October construction spending +0.6% vs +0.4% expected
• US S&P Global manufacturing PMI final for November 49.4 vs 49.4 prelim
• Canada November S&P Global manufacturing PMI 47.7 vs 48.6 prior

Markets:

• S&P 500 up 27 points, or 0.6%, to 4603
• Gold up $35 to $2071
• WTI crude oil down $1.70 to $74.26
• US 10-year yields down 13.3 bps to 4.56%
• AUD leads, EUR lags

Welcome to the new month, same as the old month.

The mood was to buy everything and sell oil, same as it was for all of November. It started out as a quiet one and a good Canadian jobs report moved the loonie into the poll position with it only up 30 pips on the day. From there though, a softer US ISM manufacturing report helped to kick off a wave of USD selling, particularly in USD/JPY.

In addition, stocks began to rip. Powell spoke similarly to Daly and Williams yesterday, which was mildly hawkish but in time the market ignored it and priced in even more rate cuts next year. Fed funds futures are now at 133 bps next year and 70% for the first one in March. That’s aggressive to say the least.

But the bigger picture theme is that we’re going back to the world of low rates and low inflation, not some kind of sticky, 1970s redux. That’s a major change and it’s what is driving everything.

Adding to that was another slump in oil, most of which came after Baker Hughes data showed the US adding more rigs. There’s a creeping feeling that we’re headed for another battle for market share because OPEC isn’t going to cut production again. That could be a big deflationary impulse, at least initially.

The euro didn’t benefit from the USD selling because inflation numbers in Europe are cratering, along with yields. The euro was particularly soft into the London fix, which points to flows and it staged a 50 pips recovery later to finish almost flat but still at the bottom of the pile beside the US dollar.

AUD is going to be one to watch in the year ahead. It was tops today and the housing market there just hasn’t cracked. That could keep the rate hiking cycle going longer but note that Chinese ETF FXI also hit at 52-week low today so maybe that’s an upside risk? Sentiment about China surely couldn’t get much worse.

Have a great weekend.

This article was written by Adam Button at www.forexlive.com.

Closing changes:

• S&P 500 +0.6%
• DJIA +0.8%
• Nasdaq Comp +0.6%
• Russell 2000 +2.9%
• Toronto TSX Comp +1.0%

This is the fifth straight week of gains, sentiment is bubbly and Jim Cramer is bullish.

This article was written by Adam Button at www.forexlive.com.

It’s a buy-everything market today, with one big exception.

Oil fell sharply today in the past two hours. The catalyst: US oil drilling rigs rose by 5 in the latest Baker Hughes weekly count. OPEC+ now has around 5 million barrels per day of spare capacity and there’s no sign yet of US production growth falling (let alone declining). There had been hopes that demand growth next year would absorb OPEC spare capacity but even OPEC is only forecasting 2.5 million barrels per day in demand growth; so it would take another year like that to tighten the market.

In the meantime though, US production continues to expand, with some help from Canada, Guyana, Iran and Venezuela.

Worse is that this is very likely to be the limit of OPEC discipline. There won’t be another cut and there’s the very real possibility of a war for market share next year and a free-for-all, leading to oil in the $40s.

Now that would be great for the inflation picture but would put most private oil companies into a money-losing position. You would think that threat would discipline them, but here we are with rigs growing.

So the market is starting to price in a real mess in oil next year, or at least the risk of that.

This article was written by Adam Button at www.forexlive.com.

This has gotten out of hand — The rate cut pricing just won’t stop.

US 2s are down 15.6 bps to 4.55% and Fed funds futures are pricing in 132 bps of cuts next year. Pricing for the first cut on March 20 is now at 73%.

It’s tough to square this with a series of Fed officials saying they’re still more likely to hike rates and that it’s too early to abandon the hawkish bias. If you are to take them at their word, we shouldn’t even be talking about cuts until H2.

And that’s how markets used to work but it’s changed. Ten or 15 years ago, the market parsed Fed comments and then leaned one way or another.

Today, markets expect Fed officials to know exactly what’s priced in via the Fed funds futures market. Instead of watching what Fed officials say, it’s all about what they don’t say. The market has been pricing in cuts and waiting for the Fed to pushback, instead, it was Waller this week (a hawk) came out and said there are good arguments that if inflation continues falling for several more months that you could lower the policy rate.

That led to the market pricing in even more easing and still, no Fed official offered a hard pushback and Barkin address markets directly saying:

„Market bets on 4 rate cuts next year might be based on expectations for soft landing. I hope they are right“

The market is running with that now the Fed is headed into a blackout until December 13.

This article was written by Adam Button at www.forexlive.com.

It’s a rare occasion that we get to see the Fed chair be the one to be last on the agenda before the blackout period goes into effect. But ahead of this month’s FOMC meeting, this will be one of those times. As such, Powell will have the chance to set to record straight on whether he agrees or disagrees with what has been priced in about the Fed outlook. It is definitely going to be an interesting one and we could see some late market moves today all before the weekend: What to know ahead of Fed chair Powell’s appearance later in the day?

This article was written by Justin Low at www.forexlive.com.

USD

• The Fed left interest rates unchanged as expected
  at the last meeting with basically no change to the statement.
• Fed Chair Powell stressed once again that they are
  proceeding carefully as the full effects of policy tightening have yet to be
  felt.
• The US Core PCE yesterday came in line
  with forecasts with the disinflationary progress continuing steady.
• The labour market is starting to show weakness as Continuing
  Claims are now rising at a fast pace and the recent NFP report missed across
  the board.
• The latest US PMIs came basically in line
  with expectations with a miss in the Manufacturing index and a beat in the
  Services measure.
• The US Consumer Confidence this week beat
  expectations although the details about the labour market continued to weaken.
• The hawkish Fed members recently shifted
  their stance to a more neutral position.
• The market doesn’t expect the Fed to hike anymore.

JPY

• The BoJ kept its monetary policy basically
  unchanged at the last meeting but formally widened the YCC to 1% on the 10-year
  JGBs stating that it will be a reference cap.
• Governor Ueda repeated once again
  that they won’t hesitate to take easing measures if needed and that they are
  not foreseeing sustainable price increases.
• The Japanese CPIlast week showed that inflation pressures are easing
  although they remain well above the BoJ’s 2% target.
• The latest Unemployment Rate ticked
  lower with the labour market remaining strong.
• The recent Japanese Manufacturing
  PMI fell further into contraction, but the Services PMI ticked higher remaining
  in expansion.
• The latest Japanese wage data beat
  expectations. As a reminder the BoJ is focusing on wage growth to decide
  whether to tweak its monetary policy.
• The market expects the BoJ to keep
  interest rates unchanged at the next meeting as well.

USDJPY Technical Analysis –
Daily Timeframe

On the daily chart, we can see
that USDJPY managed to fall into the key
trendline around the 146.50 level where it bounced as the sellers might want to
wait for a stronger catalyst before going for the breakout. A break below the
trendline, and especially below the 145.00 handle, will be strong bearish
signals and will likely confirm the top in the pair with the cycle lows being
targeted next.

USDJPY
Technical Analysis – 4 hour Timeframe

On the 4 hour chart, we can see that the latest leg
lower into the key upward trendline diverged with the MACD. This is generally a
sign of weakening momentum often followed by pullbacks or reversals. The
sellers should step in around the downward trendline with a defined risk above
it to position for a drop back into the major trendline and target a breakout.
The buyers, on the other hand, will want to see the price breaking higher to
invalidate the bearish setup and position for a rally back into the 150.00
handle.

USDJPY Technical Analysis –
1 hour Timeframe

On the 1 hour chart, we can see more
closely the current price action around the trendline. What happens here will
likely decide where the pair goes next. A break to the upside should trigger a
rally into the 150.00 handle, while a rejection and a break below the 147.60
level will make things even more interesting as the sellers will target a breakout.

Upcoming Events

Today, the main event will
be the release of the US ISM Manufacturing PMI which missed expectations by a
big margin the last time. A strong report is likely to give another boost to
the US Dollar while weak figures could weigh on the greenback in the short term.

This article was written by FL Contributors at www.forexlive.com.

Powell will be making two appearances today but at a similar event at the Spelman College. They are late ones and even more so on a Friday, as he is slated to speak at 1600 GMT and then at 1900 GMT. Here’s the agenda:

The first chat will center around „the challenges of the post-Covid economy“ before the roundtable discussion kicks off later in the day.

Given the setting, it looks like there could be room for Powell to be questioned on the Fed outlook and the key thing to watch out for now will be his remarks on interest rates. And that will be even more crucial now especially after Fed governor Waller’s remarks earlier this week here.

Will Powell double down on that or will he push back against what Waller had mentioned when it comes to rate cuts and the timing of easing monetary policy? That is the main thing to keep an eye out for.

It is also important to get a sense of what markets have priced in going into Powell’s appearance later today. Right now, there is roughly 115 bps worth of rate cuts priced in for the Fed for next year alone. The first rate cut is priced in for May right now and personally, I think we’re at the limit already in terms of pricing in added dovishness for the Fed.

The current pricing suggests that we are going to see rate cuts come within six months and that is nowhere near what the Fed had suggested with their earlier talk of higher rates for longer. So, are traders getting it wrong or is the Fed eventually going to cave in? I guess we’ll see.

This article was written by Justin Low at www.forexlive.com.