- Bullish traders' market share is already below 30%, as the longs are actively taking profit
- FOMC meeting minutes in focus, as markets look for March rate hike hints
- On aggregate, daily technical indicators are bullish; MACD is the only one pointing downwards
- Economic events to watch over the next 24 hours: US Housing Starts and Building Permits (Jan), PPI (Jan) and Industrial Production (Jan); FOMC Meeting Minutes; UK Claimant Count Change (Jan), Unemployment Rate (3M-Dec) and Average Hourly Earnings (Dec); Japanese Trade Balance (Jan) New Zealand PPI (Q4); Australian Employment Change/Unemployment Rate (Jan); Chinese CPI (Jan); FOMC Member Bullard Speaks
Moreover, gold continued to decline for a fourth session in a row on Wednesday, as global stock markets stabilized, thereby curbing demand for the safe-haven asset that hit the highest level in a year last week. However, the precious metal is still nearly 13% up for the year, making it the best performing asset this year. Investors are awaiting minutes of the Fed January 26-27 meeting to be published later today to assess the US central bank's view of the economy and a pace at which it could raise interest rates.
Canada's manufacturing sales rose more than expected in December, bolstering monthly GDP expectations. Sales rose 1.2% to $51.6 billion during the reported month, Statistics Canada reported, compared with market's predictions for a 0.8% increase. Volumes also rose 1.3%, reflecting a higher output. November's sales figure was also revised to show a 1.2% gain. The two positive months at the end of the year might translate into momentum in 2016. However, falling prices for the petroleum and coal sector dragged down sales in manufacturing, one of the largest sectors in the economy, by 1.5% last year to $609.5 billion compared with $619.1 billion in 2014. Canada's economy slid into recession in the first half of last year as GDP contracted for the first two quarters of 2015, hit hard by the drop in oil prices. Growth rebounded in the third quarter, but economists have raised concerns about the final quarter of the year. In January, the Bank of Canada downwardly revised 2015 fourth quarter growth to 0% from 1.5% on an annual basis. The central bank also lowered its projections of growth in the first quarter of 2016 to 1%, while in the three months through June the Canadian economy is predicted to grow 2.2%. Overall, Canada's economic output is expected to increase 1.5% in 2016 and 2.5% in 2017.
Japan's core machinery orders rebounded in December, despite mounting uncertainty over the global economy. Machinery orders excluding ships and utility items jumped to a seasonally-adjusted 4.2% on month in December, according to the Cabinet Office, following a massive plunge of 14.4% a month earlier. Analysts predicted machinery orders to surge 4.6% in December. Companies anticipate orders to accelerate further in January-March, in an encouraging sign that capital expenditure will support economic growth. Japanese companies expect core machinery orders to surge 8.6% in the first quarter of the year, after rising 4.3% in the October-December period. Measured on an annual basis, core orders in December dropped 3.6% Initial estimates of GDP growth showed the world's third biggest economy contracted 0.4% in the December quarter, due to a steep decline in private consumption. On an annual basis the Japanese economy shrank 1.4% during the period, compared with expectations for an annualised contraction of 1.2%. Analysts say Japan needs to ensure exports increase in order to support future economic growth. For every 1% that Japan's economy expands, between 0.5 and 0.7% comes from exports.
Upcoming fundamentals: All eyes on FOMC meeting minutes
Despite a shortened week in the US, there are plenty of data releases even throughout the four-day period. Wednesday is expected to be especially busy with news from many countries across the globe. The key event for today is the publication of FOMC meeting minutes at 19:00 GMT. They are following the January meeting of the Fed when policymakers decided to keep interest rates flat and said they are closely monitoring global market developments. Earlier last week, Fed Chair Janet Yellen had assured US lawmakers that US economy is strong enough to withstand turbulence abroad. If economy bounces back, the Fed is likely to continue with its policy normalization in the nearest future. Markets are interested, whether the March hike is still on the table.
Gold in limbo around 1,200
Tuesday was a mixed day for the bullion, as neither the bulls nor bears were managing to take a full control over the price. However, by the end of US session the latter were able to fix a red candle with the spot precisely at the 1,200 mark. The bears are still watching the Oct 2015 high at 1,191 that was briefly touched yesterday. The second support is the weekly S1 at 1,180. In the meantime daily technicals preserve the bullish bias, as they see the monthly R3 (1,209) being reclaimed over the next 24 hours. Bullish success here will potentially expose the weekly pivot point (1,221) as the second daily supply.Daily chart
A hope for a rebound remains in place, judging from gold's developments in the 1H chart. Two successive attempts to penetrate the 200-hour SMA, currently 1,200, were quickly rejected. It proclaims that bullish expectations of the market are not off the table. The key target seems to be the May 2015 high where the precious metal opened this week's trading at 1,232/35.
Hourly chart
Bullish market portion drops below 30%
Ironically, the OANDA portion of long traders has seen a confident improvement in course of the past 24 hours to almost 63%, even though yesterday it stood about six percentage points below today's mark. As for SAXO Bank bullish-bearish distribution, it seems to be mostly stable at 58-42%.