Last
week, the NFP missed
expectations for a second time in a row and the previous numbers were all
revised lower. This was seen as a disappointment as the labour market seems to
be a touch weaker than previously expected and we saw a brief rally in Gold.
The unemployment rate though, fell once again and lessened the disappointment
from the miss in the payrolls number. The worse part for the Fed is that the
average hourly earnings beat expectations, and such high wage growth is not
consistent with a sustainable return to the 2% target. This may have led to the
selloff soon after the rally as it increases the risk of more hikes in the future.
It’s worth reminding though, that the Fed will see another NFP report before
the September meeting, so this NFP doesn’t change much, but the data leading
into the meeting can still weigh on sentiment.
Gold Technical Analysis –
Daily Timeframe
Gold Daily
On the daily chart, we can see that Gold has
eventually reached the 1934 support after
the rejection from the 1984 resistance. This is where we should see the buyers
stepping in with a defined risk below the level to target the 1984 resistance
first and eventually the breakout. The sellers, on the other hand, will want to
see the price breaking lower to pile in even more aggressively and extend the
selloff into the 1893 low.
Gold Technical Analysis – 4
hour Timeframe
Gold 4 hour
On the 4 hour chart, we can see more closely the
price action around the 1934 support. The spike lower after the miss in the NFP
led to a brief rally into the 1943 swing low resistance where we have also the
38.2% Fibonacci retracement level.
The sellers stepped in there with a defined risk above the level to target a
break below the 1934 support. The buyers will need to defend the level as a
break lower would open the door for the selloff into the 1893 level.
Gold Technical Analysis – 1
hour Timeframe
Gold 1 hour
On the 1 hour chart, we can see that we
had a mini range around the 1934 support that was broken on both sides
following the NFP release. It’s always better to ignore the spikes after such
high impact news and focus on the levels and the direction that the news is
supporting with a higher probability. The price has returned back within the range,
and it will be another waiting game until we get a breakout.
Upcoming Events
This week the
main event will be the US CPI report on Thursday. The disinflationary trend
seen in the past months has been a tailwind for Gold as the market kept expecting
the Fed to be done with rate hikes soon, but strong US data kept coming in and
pushed the end of the hiking cycle further in the future, ultimately weighing
on the precious metal. In fact, an upside surprise in this report is likely to
weigh on Gold as the market would expect more hikes and push the pause even
further away. On the other hand, another miss in the data should provide some
relief and lead to a rally. After the US CPI we will also see the latest US
Jobless Claims report, which is less likely to move the market since it’s
released at the same time of the CPI, but big surprises should have an effect,
nonetheless. Finally, we conclude the week with the University of Michigan
Consumer Sentiment report on Friday where the market is likely to focus more on
the inflation expectations figures.