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Non-Farm Payrolls (NFP) Preview: Implications for Gold Prices (XAUUSD)

Gold prices

On Friday, November 6, the Non-Farm Payrolls figure for October 2020 will hit the newswires. The expectation is for employment change to drop from 661K to 595K. A drop in the unemployment rate from 7.9% to 7.7% is also expected. 

Labour conditions in the United States for October have experienced a slight deterioration. Apart from the underwhelming numbers from the private sector employment data on Wednesday, Thursday’s weekly initial jobless claims report showed a filing of 751K claims for first-time unemployment benefits. This number was less than the previous number of 758K (an upward revision), but more than the markets had expected (740K). 

Several high-profile companies had made layoff announcements earlier in October, but this has not shown up in the jobless claims figures. Tomorrow’s number may see an increase in tomorrow’s October payroll report, but at a slower pace than expected, according to analysts at Wells Fargo. 

Payroll numbers remain short of pre-pandemic levels. The rising coronavirus case counts and anticipated increase in job losses could prompt anticipatory weakness on the USD.]

The pair of choice for me in trading the NFP remains the XAUUSD pair. 

Technical Levels to Watch

A payrolls number that is USD-positive may favour bearish action on the XAUUSD. A rejection at the 1954.77 resistance favours this outlook, which allows 1940.15 to come into view as the initial downside target. Further targets to the south include 1918.68 and the psychological 1900.76 support. 

On the flip side, a jobs number that is regarded as USD-negative could further propel gold prices, allowing the pair to aim for 1969.95 and possibly 1980.74. These targets become achievable only if bulls can break the 1954.77 resistance. 

Beyond the NFP report, further uncertainty about the outcome of the US elections could continue to play a part in the gold price action.  

XAUUSD Daily Chart