Gold extends the rally after the soft NFP, but the US CPI could wipe out all the gains
FUNDAMENTAL
OVERVIEW
Gold extended into new highs yesterday as a soft NFP report on Friday led
to a dovish repricing in Fed interest rate expectations.
Overall, the data wasn’t as bad as the headline number suggested. The
significant loss of government jobs made the report look much softer than it
actually was. In fact, the unemployment rate painted a different picture,
falling further to 4.1%. The labour market remains on a better trajectory than
it has been over the past three years.
Today, the price action might be mostly rangebound or we could see some
hedging into the US CPI tomorrow that could result in some weakness. The data
will be critical for the September FOMC decision and the Jackson Hole
Symposium.
A hot report will likely trigger a selloff in gold, with traders increasing
rate hike bets. A soft report, on the other hand, should reduce further the
risk of Fed tightening and give gold another boost to extend the rally into new
highs.
GOLD TECHNICAL ANALYSIS – DAILY TIMEFRAME
On the daily chart, we can
see that gold has almost reached the major trendline around the 4,500 level.
That’s where we can expect the sellers to step in with a defined risk above the
trendline to position for a drop into the 3,885 level. The buyers, on the other
hand, will want to see the price breaking higher to increase the bullish bets
into the 4,800 level next.
GOLD
TECHNICAL ANALYSIS – 4 HOUR TIMEFRAME
On the 4 hour chart, we have
a minor upward trendline defining the bullish structure. The buyers will likely
lean on the trendline with a defined risk below it to keep pushing into new
highs. The sellers, on the other hand, will look for a break to pile in for a
drop into the 4,200 support next.
GOLD TECHNICAL ANALYSIS – 1
HOUR TIMEFRAME
On the 1 hour chart, there’s
not much we can add here as the buyers will have a better risk to reward setup
around the minor trendline, while the sellers will need to wait for either a
break below the minor trendline or a rally into the major one. The red lines
define the average daily range for today.
UPCOMING CATALYSTS
Tomorrow, we have the US
CPI report. On Thursday, we get the US PPI data and the latest US Jobless
Claims figures. On Friday, we conclude the week with the US Retail Sales and
the University of Michigan Consumer Sentiment report.
This article was written by Giuseppe Dellamotta at investinglive.com.