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
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
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
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.
