Daily Brief, July 2: How to Trade Gold on the US NFP Figures Today?
Arslan Butt • 3 min read
Good morning, traders.
The market is likely to exhibit sharp movement on the back of the NFP release today. Typically, the NFP is released on Friday, but considering the U.S. bank holiday, for the Independence Day celebrations, the U.S. labor department will release the report today. Sharp movement is expected in dollar-related currency pairs and gold. Economists are expecting a slight improvement in data, which could drive the bullish trend in USD during the U.S. session.
The U.S. economy will be releasing its non-farm payroll figures today. This is among the most awaited data, and it is expected to show a 12.4% unemployment rate, along with 3,037K Non-Farm Employment Change, while the jobless claims are expected to be 1,350B – figures like this should drive sharp movement in both the dollar and GOLD.
The US NFP (Nonfarm Employment Change) and the unemployment rate will remain under the spotlight. Both these economic data sets will be monitored at 12:30 GMT. NFP is expected to drop dramatically to 3,037K versus the 2,509K we saw during the previous month.
Whereas the unemployment rate is also expected to drop from 13.3% to 12.4% and the Average Hourly Earnings are expected to rise by -0.8% versus the previous figure of -1.0%. The stronger data will offer an opportunity to lengthen the greenback for a quick 60-100 pips and vice versa.
Coronavirus vs Gold
The recent biggest one-day rise in the U.S. coronavirus (COVID-19) cases urged California to reimpose some lockdown measures that could dampen recovery in fuel demand. As per the latest report, the new daily coronavirus cases in the U.S. crossed more than 48,000 figures, registering the highest increase since the start of the pandemic.
Moreover, Trump’s latest tweet also exerted some burden on the risk sentiment in the market. “As I watch the pandemic spread its ugly face all across the world, including the tremendous damage it has done to the USA, I become angrier and angrier at China. People can see it, and I can feel it!”
On the USD front, the broad-based U.S. dollar reported gains on the day, backed by the fears of ever-increasing coronavirus cases in most of the nations. However, the gains in the U.S. dollar turned out to be one of the key factors that kept the gold prices flat, as they both have a negative correlation.
As a result, the S&P 500 Futures printed 0.30% losses, down to 3,081 at the press time. Furthermore, Japan’s Nikkei has printed 0.20% gains, whereas the U.S. 10-year Treasury yields remain only modestly changed, at around 0.66% at the moment.
The broad-based U.S. dollar drew offers on the day, possibly due to the modest upbeat trading sentiment, backed by the hopes of further stimulus and an optimistic outcome of the global PMIs. However, the losses in the greenback could be short-lived or temporary, as the second wave of the coronavirus is continuously picking up pace in the U.S. thereby boosting the safe-haven demand in the market, although, the losses in the U.S. dollar turned out to be one of the key factors that kept a lid on any additional losses in the oil prices, as the price of oil is inversely related to the price of the U.S. dollar. At the same time, the U.S. Dollar Index that tracks the greenback against a basket of other currencies, dropped by 0.04% to 97.118.
Looking forward, the market participants will keep their eyes on the key U.S. employment figures for June before forecasting near-term moves. From the forecast view, the headline Non-farm Payrolls (NFP) increased from 2,509K compared to the previous 3,000K, whereas the Unemployment Rate receded from 13.3% to 12.3%.
Gold – XAU/USD – Daily Technical Levels
Pivot Point 1785.17
GOLD is trading in a wide trading range. on the 1,773 to 1,766 level. The upward trendline on the hourly timeframe is supporting the bullish bias in gold. On the lower side, support for gold prevails at around the 1,759 and 1,749 levels. On the flip side, a bullish breakout on the 1,773 level could extend the buying trend to the 1,789 level. Neutral bias is expected until the release of the U.S. NFP figures today. Good luck!