Daily Brief, Aug 07 – Trading Gold on NFP – What to Expect?
Arslan Butt • 3 min read
Good morning traders,
The market is likely to exhibit sharp movement on the back of the NFP release today. Sharp movement is expected in dollar-related currency pairs and gold. Economists expect a slight improvement in data, which could drive the bullish trend in the USD during the US session.
The US economy will release its non-farm payroll figures today. This is among the most awaited data, and it is expected to show a 10.5% unemployment rate, along with a 1,530K Non-Farm Employment Change, and this is expected to drive sharp movement in both the dollar and GOLD.
The US NFP (Non-farm Employment Change) and the unemployment rate will remain under the spotlight. Both these economic data sets will be monitored at 12:30 GMT. The NFP is expected to drop dramatically to 1,530K, versus the 4,800K we saw during the previous month.
Meanwhile, the unemployment rate is also expected to drop from 11.1% to 10.5%, and the Average Hourly Earnings are expected to rise by -0.5%, versus the previous figure of -1.2%. The stronger data will offer an opportunity to lengthen the greenback for a quick 60-100 pips and vice versa.
Gold prices extended their long winning streak and refreshed an all-time high above the mid-$ 2,000 level, having hit a high of $ 2,075, amid the initial hour of today’s Asian trading. Notably, the yellow metal buyers are unstoppable, after having crossed the $ 2,000 level, drawing support from the US policymakers’ continuous failure to deliver a fiscal stimulus, coupled with virus woes and the long-lasting Sino-American tussle, which initially caused the risk-off market sentiment and put the safe-haven bids under the yellow-metal prices.
The gold prices have trimmed some of their earlier gains, as the broad-based US dollar started to put in safe-haven bids, which turned out to be the major factor that capped a further upside in the yellow metal’s prices. The central banks of the notable countries are pushing towards easy money and dovish statements, which will also add strength to the gold prices. In the meantime, the renewed tussle between the US and Canada is also weighing on the market trading sentiment and contributing to the bullion gains. At the moment, the precious metal is trading at 2,058.80 and consolidating in the range between 2,049.74 – 2,075.14. However, the bullion traders seem cautious to place any strong position, ahead of the US NFP stimulus talks.
Be it the American lawmakers’ failure to offer any announcement on the coronavirus (COVID-19) relief package or the renewed US-Canada tussle, not to forget the worsening of the COVID-19 situation in Victoria and Tokyo; the market traders are putting their bids on the safe-haven yellow metal. US Senate Democratic Leader Chuck Schumer recently verified that the parties are still divided regarding any agreement over the much-awaited Phase 4 fiscal stimulus. In the meantime, the Republican head of the Senate, Mitch McConnell, has canceled the talks for this week – they will resume on Monday at 03:00 PM EDT, despite President Donald Trump’s warning that he will take executive action if the standstill persists.
Regarding the lawmakers’ failure to reach an agreement on the coronavirus (COVID-19) relief package, President Donald Trump said he was expecting to sign orders on Friday or Saturday, extending improved unemployment benefits and the imposition of a payroll-tax holiday, as legislators have been incapable of agreeing on a stimulus bill that includes those measures. This news initially helped to limit deeper losses on the equity market.
On the US-Canada front, the Trump administration has considered imposing tariffs on Canada’s aluminum, which would renew the trade war among the global majors. Following the announcement by the US, the other side has yet to respond. The banning of TikTok in the US is also weighing on the risk sentiment. As we know, TikTok is under immense pressure to sell its stake to Microsoft, which could further escalate the on-going Sino-American tension.
However, the downbeat trading sentiment could be attributed to the increasing number of coronavirus cases in the Australian state of Victoria, which has recorded 451 new cases. Considering the worsening situation in Victoria, Aussie Treasurer Josh Frydenberg announced the opening of the government purse strings for the JobKeeper program. The Aussie government official announced $ 13.00 billion of $ 15.6 billion packages for Victoria. Across the pond, the BOJ policymakers are ready for action, with the recent numbers tracking record highs. Let me remind you that Tokyo recorded 360 new cases on Thursday, against the previous 263.
Daily Support and Resistance
Pivot Point 2057.9
It will be a busy day for the precious metal, as gold traders await the US labor market data, especially the NFP, which is due to come out during the US session. Gold is facing resistance at the 2,073 level, along with support at 2,054. It has recently violated the upward trendline support level of 2,065, which may work as a resistance for now. But the bearish bias seems to be dominating at the moment. Let’s keep an eye on 2,054, as a violation of this level may trigger more selling up to 2,037 and 2,018 today. Good luck!