Saturday, January 22 2022
  • The Bureau of Labor Statistics today releases the unemployment rate, average hourly earnings and nonfarm payroll data.
  • Economists expect nonfarm employment figures to increase from 850K to 870K.
  • Forex market participants can sell below $ 1,806 to target the $ 1,793 and $ 1,985 levels on Friday.

Gold prices closed at $ 1,805.55 after hitting a high of $ 1,817.85 and a low of $ 1,799.85. It fell for a third consecutive session as the US dollar was strong in the market. Gold price forecast remains bearish ahead of US NFP figures today.

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Positive US Jobs Data (Non-Farm Payroll) Forecast Keeps Gold Bearish

The US dollar rose on Thursday and posted gains for the third consecutive session ahead of the release of US employment data scheduled for Friday. The Bureau of Labor Statistics Today releases unemployment rate, average hourly earnings and nonfarm payroll data during the New York session.

Economists expect nonfarm employment figures to increase from 850K to 870K. The projected increase of 20,000 jobs suggests a better economic situation in the United States. Therefore, traders are shifting their investments towards the dollar to incorporate the optimistic forecasts of the NFP.

In addition, the unemployment rate is expected to drop from 5.9% to 5.7%. This is also expected with an optimistic forecast; this is the reason why investors buy the US dollar. The increased demand for the US dollar is having a bearish impact on gold, as the two assets share a negative correlation. In addition, the Fed governor’s hawkish comments also bolstered the already rising US dollar prices.

The US Dollar Index (DXY), which measures the value of the greenback against the basket of six major currencies, rose for the day and hit 92.35, which ultimately kept the precious metal under pressure.

Governor Christopher Waller’s Hawkish remarks weigh on gold

Meanwhile, Fed Governor Christopher Waller said the US economic recovery was progressing rapidly. The job market has improved, increasing the Federal Reserve’s chances of starting to withdraw its accommodative monetary policy sooner than expected.

Waller had high hopes for the July jobs report due to be released on Friday. He reiterated the possibility that the US labor market will recoup about 85% of jobs lost by September during the coronavirus pandemic. The reading was presented after counting nearly 2 million people who retired during the public health crisis.

Waller also gave his criticisms of inflation and said he viewed mounting inflationary pressures as transitory. However, there are risks that these higher prices will stay longer than expected. He further predicted that investors could see some relief from price pressures in the fourth quarter of this year. These comments from Waller strengthened the US dollar and pushed gold prices down.

Review of fundamentals impacting gold and the dollar

On the data front, at 4:30 p.m. GMT, Challenger job cuts in July hit -92.8% from -88.0% previously. At 5.30pm GMT, last week’s jobless claims were flat with expectations of 385K. As of June, the trade balance fell to -75.7 billion from the projected -74.2 billion and weighed on the US dollar, further limiting the loss in gold prices.

The main reason behind gold’s downtrend to the downside is hawkish comments from a senior Federal Reserve official. They increased bets on an early reduction in asset purchases by the US Central Bank.

Additionally, investors are also eagerly awaiting the release of Friday’s NFP data which could provide a deeper clue as to the Fed’s shrinking dovish stance towards the economy.

Prior to the critical jobs report, gains in the US dollar were also weak, as investors were cautious about strong offers ahead of jobs data. Therefore, the trading volume and loss of precious metals is limited at this time, and we may see high volatility during the release of NFP.

Gold Price Forecast – Technical Levels

Gold – XAU / USD – 4 hour chart

Support resistance

1797.65 1815.65

1789.75 1825.75

1779.65 1833.65

Pivot Point: 1807.75

Gold Price Prediction – Daily Technical Analysis: XAU Target $ 1,793

Gold price forecast remains bearish below the $ 1,805 level. However, investors will primarily focus on data from the US NFP and the unemployment rate. Recall my forecast of the gold price of August 05. Gold has already breached the support level of $ 1,809.

The closing of the candles below suggests a strong selling trend for gold. Therefore, gold’s immediate target will likely be the lower triple support level of $ 1,793. A break down below this level may trigger an additional sell trend until the next support level of 1785.

On the 4-hour chart, the yellow metal formed the “Three black crows” pattern suggesting strong bearish sentiment among gold traders. In contrast, the 50 day EMA (exponential moving average – red line) will extend a hurdle at the $ 1,810 level. The bullish cross above 50 EMA may drive the price of gold towards $ 1,820 and $ 1,833.

The Currency trading market participants can sell below $ 1,806 to target the $ 1,793 and $ 1,985 levels on Friday. Conversely, the buy limit may be placed above $ 1,793 before the release of the NFP figures. All my wishes!

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