Non-farm Payrolls (NFP) Preview: The Possibilities for Gold Price
Tomorrow’s Non-Farm Payrolls report is the first that will document the impact of the coronavirus pandemic on unemployment in the United States fully. So far, data from the ADP on private sector employment and the initial jobless claims figures for April point to a loss of tens of millions of jobs. Tomorrow’s NFP provides an estimate of a loss of 21.4 million jobs, with a rise in the unemployment rate to 16.0%. These figures are much worse than the -701,000 and 4.4% obtained as employment change and the unemployment rate the last time around. The projection for the Average hourly earnings is a drop from 0.4% to 0.3% as employers furlough workers and deploy pay cuts across the board.
So far, the US markets have chosen to focus on the reopening of the US economy and the stimulus from the US Federal Reserve. These measures are to help businesses reopen on the improved financial footing and reverse the present downtrend in employment.
The critical question for tomorrow will be whether the markets will choose to ignore the data, or whether the numbers will be so dismal that investors would begin to reassess their positions.
The redrawn symmetrical triangle on the daily chart of XAUUSD has the lower border crossing the 1680.24 price level as support. Today’s price action bounced from this area and met rejection at the upper boundary of this triangle.
The triangle and the move which precedes it form a bullish pennant. The technical expectation is for the price to break the pattern and ascend towards the 1792.26 price level as the measured move from the breakout. This move would have to contend with the resistance at 1753.29, and can only be supported if the markets interpret the NFP data as USD-negative.
On the flip side, we also have a possibility of the triangle acting as a topping pattern. If the markets perceive tomorrow’s NFP data as USD-positive, we would likely see a selloff in gold prices which could send the XAUUSD below the 1680.24 price level in a breakdown move. This move could then aim for the downside target at 1658.89, with 1635.53 getting ready to come into view if the downside move is strong.