XAU/USD: dollar and labor market data in the US - the focus of traders
In recent days, gold prices have been under pressure amid strong US economic data. They strengthened expectations of another increase in interest rates before the end of the year. With an increase in the interest rate in the US, the price of gold usually falls, if the calm geopolitical and financial and economic situation in the world also contributes to this.
According to CME Group, the markets take into account the 83% chance of raising rates this year against 44% a month ago.
With an increase in interest rates, precious metals, including gold, usually become cheaper, if the geopolitical situation at this time remains stable. Gold, which does not bring investment income and can not compete with more profitable assets, becomes cheaper, as the cost of borrowing for its acquisition and storage grows with an increase in the interest rate.
The volume of trading is not large before the publication today at 12:30 (GMT) of the report on the number of jobs outside of US agriculture. Some economists believe that a significant increase in jobs would justify another increase in interest rates by the Federal Reserve System before the end of this year. If NFP grows by less than 100,000, the dollar may fall sharply.
At the same time, the market can ignore NFP data, because the number of employees could have decreased due to recent hurricanes. The most important detail in the report on US employment may be a pay indicator. For five consecutive months, the growth of salaries in the US remained unchanged at 2.5% compared to the same period of the previous year. Now it is expected that the indicator will remain unchanged. This is a negative factor for the dollar, despite the fact that unemployment will remain at the same low level of 4.4%.
In any case, at 12:30 (GMT) we should expect a dramatic surge in volatility, not only in gold prices, but throughout the currency market, which must be taken into account when making trading decisions. The most cautious trading position for today is to stay out of the market.
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Support and resistance levels
Since the opening of today, the pair XAU / USD is trading in a narrow range near the support level 1270.00 (EMA144 on the daily chart).
The scenario for the decline will be related to the breakdown of the support level of 1262.00 (EMA200 and the bottom line of the ascending channel on the daily chart). The immediate target is the support level of 1248.00 (the Fibonacci level of 50% correction to the wave of decline since July 2016). Breakdown of the key support level of 1248.00 will provoke a further decline in the pair XAU / USD and its return to the downtrend.
Indicators OsMA and Stochastics on the 4-hour, daily, weekly charts recommend short positions.
The fundamental background (tightening of monetary policy in the US) creates the prerequisites for further reduction of XAU / USD, unless there is another escalation of geopolitical tensions, including on the Korean peninsula.
The alternative scenario is connected with the breakdown of the nearest resistance level at 1277.00 (Fibonacci level 61.8%) and further growth with a long target of 1357.00 (annual highs). The more distant goal is at the level of 1370.00 (the beginning of the wave of decline since July 2016 and the Fibonacci level of 100% and the upper limit of the rising channel on the weekly chart).
Support levels: 1270.00, 1262.00, 1248.00
Resistance levels: 1277.00, 1293.00, 1312.00, 1340.00, 1350.00, 1357.00
Trading Scenarios
Sell Stop 1265.00. Stop-Loss 1275.00. Take-Profit 1262.00, 1260.00, 1248.00
Buy Stop 1275.00. Stop-Loss 1265.00. Take-Profit 1277.00, 1290.00, 1312.00, 1340.00, 1350.00, 1357.00
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