April lows in Gold has our attention – NFPs to be a bearish catalyst for a break?

May 3, 2019

By Admiral Markets

Economic events calendar

Source: Economic Events May 3, 2019 – Admiral Markets’ Forex Calendar

Today, the eyes of the market will be on the Non-Farm Payrolls, hoping to spot any signal that they’ll act as an accelerator in Gold for a break below 1,266 USD.

In our opinion, chances of this happening seem likely: after the release of ADP data on Wednesday, reporting that US private businesses hired 275k workers in April (exceeding an expected 180k, and usually acts as a first indication), one can see why.

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Sure, the weak ISM Manufacturing data was released later that day, coming in at 52.8 (against an expected 55 points, its lowest level since October 2016) and particularly when coupled with the low reading for the ISM employment component at 52.4 against 55.8 – should be taken with a grain of salt.

But the main reason for our bearish outlook for Gold is a result of comments from Fed chairman Powell: at the rate decision last Wednesday, he made a point to emphasize that he does not see a case for shifting the Fed’s monetary policy ‘in either direction’.

With that in mind, and knowing that markets predicted a 60% chance of a rate cut from the Fed through December 2019, we think that there is still too much dovishness priced into existing Fed policy to expect a change.

That said, any NFP data set that comes in as expected or slightly above 185k, especially with Average Hourly Earnings (MoM) surprising on the upside (0.3% and above), is capable of accelerating movement in Gold on the downside, and result of a push to our Head-should-projected target around 1,230 USD in the coming days:


Gold index daily chart

Source: Admiral Markets MT5 with MT5-SE Add-on Gold Daily chart (between January 31, 2018, to May 2, 2019). Accessed: May 2, 2019, at 10:00pm GMT – Please note: Past performance is not a reliable indicator of future results, or future performance.

In 2014, the value of Gold fell by 1.7%, in 2015, it fell by 10.4%, in 2016 it increased by 8.1%, in 2017 it increased by 13.1%, in 2018, it fell by 1.6%, meaning that after five years, it was up by 6.4%.

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Source: April lows in Gold has our attention – NFPs to be a bearish catalyst for a break?

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