Intraday Market Thoughts Archives

Friday's release of the US July NFP and unemployment rate numbers is expected to show the 3rd straight gain in the former and a decline in the latter. But there are two other crucial considerations you need to keep in mind. And what would you do if you're long gold and worried about your position? See more below.  The WhatsApp Broadcast Group was given suggestions on how to hedge any longs in XAUUSD and EURUSD ahead of the report, using a combination of FX and indices trades. 

July NFP are expected to show a rise of 870K from 850K in June, while the jobless rate is seen falling to 5.7% from 5.9%. If realized, both outcomes could be USD-positive and gold-negative… or so we may think. But comments from Fed governor Waller indicating that +1 million reading in Friday's release of July NFP and over 1 million in the August NFP, imply that about 4/5 of the lost jobs would have been restored.  Whether that is accurate or not is not as important the possibility that Waller may have raised the bar for the upcoming NFP. Said differently, we're unlikely to see any durable USD strength, or prolonged selloff in treasuries in the event of 900K-980K figure. Unless the unemployment rate drops below to 5.7% without any declines in the labour participation rate, there will remain doubts.

The above charts show the the unemployment rate will have to drop from 5.9% to 4.0% and stay at or below it for a convincing period of time in order for the labour market to regain its pre-pandemic footing. 

Let's also not forget about average hourly earnings seen steady at 0.3% m/m. Do not watch the y/y figure due to base effect distortions. Any figure below 0.4% or 0.5 would suggest inflation pressures have not yet made their way into wages. 

The above presents a high a bar for rocking the status quo in USD and rates. But even if the 1.0 million figure shows up on Friday, traders will require a repeat at the September release in order for taper to start in Q4.

Our Whatsapp Broadcast Group had been long gold, NZDUSD and EURUSD among other positions. So what would you do to hedge your XAUUSD exposure ahead or after the jobs report? A set of suggested trades was given to out members this evening.  Good trading. 

 

Just as falling bond yields were becoming the path of least resistance, a combination of upside surprise in services ISM and hawkish comments from Fed vice chair Clarida. The pre-FOMC Premium trade in NZDUSD is now over 100-pips in the green and Tuesday's Premium trade was up +80 pips until the bounce in yields.  Ashraf told the WhatsApp Broadcast Group (see below) he remained long gold from 1812 until 1832 -- and that's where gold topped out before plunging after ISM and Clarida. 

Services ISM hit a fresh record at 64.1 with strong gains in prices paid (82.3 from 79.5) and employment (53.8 from 49.3). Clarida doubled down on taper and rates, saying the former could start as early as this year and the latter could lift by late 2022 or early 2023. 10 year yields spiked from under 1.14% to over 1.20%, dragging metals and JPY across the board. Clarida's comments could grease the wheels of USD bulls on any sign of beat in Friday's jobs figures, despite today's miss in the ADP. 

Did Clarida's comments tell us anything new? Apart from telling us he is one of the hawkish dots who made the shift at the June FOMC, not much. The division inside the Fed will likely grow wider, which will only lead them to compromise on taper in terms of size, pace and timing.