- Bearish SWFX market share hovers near multi-week highs, at 66% on Friday
- The closest demand zone (monthly/weekly PPs, 20/55-day SMAs) unlikely to let gold fail
- Weekly technical indicators are continuously bullish on gold
- Economic events to watch over the next 24 hours: French, German and Euro zone Flash Manufacturing and Services PMI (Apr); Italian Retail Sales (Feb); Eurogroup and ECOFIN Meetings; Canadian Retail Sales (Feb) and CPI (Mar)
The number of Americans applying for unemployment benefits unexpectedly declined last week, reaching its lowest level since 1973, suggesting a sharp slowdown in economic activity in the first quarter could be temporary. First-quarter gross domestic product growth estimates are currently as low as a 0.2% annualized rate. The economy expanded at a 1.4% rate in the fourth quarter. Initial jobless claims, a proxy for layoffs across the US, dropped by 6,000 to a seasonally adjusted 247,000 in the week ended April 16, according to the Labor Department. That was the lowest level for unemployment claims since the week of November 24, 1973. That also marked the 59th consecutive week that initial jobless claims remained below 300,000, the longest such streak in more than four decades. Employers created 215,000 jobs in March, whereas the unemployment rate edged up to 5%, but the rise partly reflected more workers entering the labour force. Fed officials will likely consider the relative health of the labour market at next week's policy meeting. However recently, policy makers have voiced their concerns about weakness in the global economy and are watching inflation readings and wage gains closely. A large majority of economists expect the Fed to hold its benchmark interest rate steady at the meeting.
Activity levels across Japan's manufacturing sector contracted sharply in April. Japanese manufacturing activity contracted this month at the fastest in more than three years and output fell the most in two years, after earthquakes halted production in the southern manufacturing hub of Kumamoto. The preliminary Nikkei Manufacturing Purchasing Managers Index fell 1.1 points to a seasonally adjusted 48.0 in April from a final 49.1 in March. The data was way down the expected 49.6 figure. The PMI remained below the 50 threshold that separates contraction from expansion for the second consecutive month and showed activity contracted the most since January 2013. Moreover, the output component of the PMI index also fell to 47.9 from 49.8 in the previous month to show the fastest contraction since April 2014. The sharp drop in total new work was underpinned by the fastest fall in international demand since December 2012, and following the two earthquakes in Kumamoto, the outlook of the goods-producing sector now looks especially uncertain. Although there is significant uncertainty over the April result, the weakness in the survey, along with other data outside of the labour market, could prompt the Bank of Japan to cut rates further into negative territory or add to its QQE program, or both, when it holds its next monetary policy meeting next week.
Upcoming fundamentals: Canadian data in focus as retail sales and CPI are up
Two trading sessions will bring important fundamentals on Friday, precisely the ones in Europe and Canada. Flash PMI numbers for April in many countries of the Euro zone will be out throughout morning part of the day, while Canadian data is out in the afternoon period. This is going to include retail sales for February, as they are estimated to dip by 0.8% on both headline and core basis. As for inflation in March, economists project additional monthly price increases in the range of 0.4-0.5%.
Gold pushed down by bears at 1,262/70
Yesterday the bullion set a new formal April high above 1,270 that is placed also above the February high of 1,263.43. However, it failed to resist bearish pressure at those uplifted levels and was forced to tumble back, by closing the session at 1,247.66. Nonetheless, bullish plans are clear and they are going to use any possible attempts to achieve their ambitious goals. There is a dense support zone below the spot at 1,241/34 that makes the bearish case quite improbable too. However, it likely means that the metal is on course to trade in a limited range for some period of time, until the next major trigger appears.Daily chart
The bulls were strong enough to penetrate the nearest resistance at 1,257.92, namely the April 20 high. They were even able to cross the April 12 high at 1,262.67. However, issues arose when XAU/USD neared the March 17 peak at 1,271.03. This is where gold failed and was pressed significantly to the downside. Nevertheless, we suspect it is not the end for the bulls, as they avoided a drop below the 200-hour SMA, currently at 1,243.62. Additional demand is offered by the April 1-19 uptrend around 1,233.
Hourly chart
Sentiment unable to recover noticeably, adds only two pp
OANDA's long clients recovered to almost 60% by Friday morning, as yesterday their portion stood at multi-day low of about 56%. As for SAXO Bank market participants, their opinions are still skewed towards the bearish side, albeit only in 52.33% of all cases.