The Commodities Get Clobbered
06-05-2011
Simply put Thursday was an absolutely wild day for traders across many fronts. The EUR sank sharply against the USD and this came about as the physical resources all suffered severe declines. Gold, Silver, and Crude Oil found vast downward pressure. The broad markets not only were reacting to what was perceived as a dovish speech by ECB President Trichet, but also fell on poor economic data coming from the States, namely the weekly Unemployment Claims figures which had a result of 475k. The spike in the weekly jobless numbers caused Wall Street to wobble again too, which helped its week long slide continue to foster negative sentiment.
Today the Non Farm Employment Change numbers are on schedule from the States and a figure of 185k is expected. The economic data from the States has been disappointing and investors are becoming weary from the negative numbers. The USD gained strongly against the EUR on Thursday, its one day movement was fast and volatile, now the question that will be asked is if this is a reversal and the beginning of a new trend or is it merely short term trading that is causing a whipsaw effect.
Traders were barraged by many volatile aspects on Thursday. Not only did the EUR, the GBP decline, but the AUD also felt renewed pressure as the commodity markets were seemingly hit from all directions. Going into this weekend traders will have to be aware of not only sentiment that is nervous because of the previous session, but also because of the hugely important jobless number coming from the States today.
The commodity markets decline has been quick enough to create suggestions that large speculators have suddenly decided to take profits. But one or two days cannot be judged as a trend, perhaps in a week’s time if this sudden turn about continues, hindsight will let analysts point to this week as a trigger – but more evidence needs to be gathered.
The JPY held firm yesterday in wicked market conditions. Asian bourses also slid on the negative results and sentiment that came because the U.S. markets suffered. The rout in the Crude Oil and Gold prices yesterday will have investors globally asking today about risk aversion, safe havens, and have many scratching their heads.
Market conditions today are bound to be fast and with the Non Farm Employment Change numbers only a stone’s throw away at 12:30 GMT today investors cannot be faulted for being on edge. Equities, commodities, and currencies will all likely continue to see volatile trading today and the real art will be maneuvering around any storms that come.
If the jobless numbers are worse than expected today this could propel Wall Street further South going into the weekend and leave investors looking for a safe place to leave their money, which adds to the possibility that the USD could get stronger as the wild week comes to a close.
