- More bullish traders are coming into the SWFX market, as their share surged from 53% to 55%
- The price was stopped by 100-day moving average at 1,108; a bearish correction is projected today
- Daily and weekly technical indicators assume the bullion will stabilize near current trading levels
- Economic events to watch in the next 24 hours: German Industrial Production (Nov) and Trade Balance (Nov); French Trade Balance (Nov) and Industrial Output (Nov); US Non-Farm Payrolls, Average Hourly Earnings and Unemployment Rate (Dec); Swiss CPI (Dec); UK Trade Balance (Nov); Canadian Net Change in Employment (Dec), Unemployment and Participation Rates (Dec) and Building Permits (Nov); Chinese CPI (Dec)
Gold trimmed its best weekly rise since August as global markets surged after Chine announced it would refrain from further cut in its exchange rate, halting equity plunge. China set its Yuan reference rate little changed from Thursday's fixing following an eight-day streak of reductions, which triggered turbulence in markets. Nevertheless, the outlook for gold predominantly depends on the pace of US interest rate hikes. Market rout as well as deflationary effect of declining oil prices may make the Fed more cautious on lifting borrowing costs.
The number of Americans applying for unemployment benefits dropped last week from a more than five-month high, indicating the labour market remains solid even as economic growth is likely to have slowed sharply in the final quarter of 2015. Initial claims for jobless benefits fell 10,000 to a seasonally adjusted 277,000 for the week ended January 22, according to the Labor Department. The drop partially offset a surge in claims of 20,000 in the preceding week to their highest level since July. Many economists argued that spike was caused by seasonal volatility around holiday employment. The four-week moving average of claims declined to 275,750 last week, down from 277,000 a week prior. It was the 44st consecutive week that claims remained below the 300,000 mark, which is associated with a healthy labour market. Some economists are concerned that low claims figures may suggest a lack of dynamism in the labour market. The Labor Department is due to release its monthly employment report later in the day. Economists predict employers likely added 200,000 workers last month. The ADP report showed private-sector created 257,000 jobs in December, the strongest gain since December 2014.
Bank of Canada Governor Stephen Poloz highlighted that divergence has become the dominant topic across the globe. While the Fed has just begun monetary policy normalization after seven years of keeping its fed funds rate near zero, other banks cut rates in the past year, including the recent ECB's move of lowering its deposit rate. Poloz believes that the theme of divergence is likely to remain for some time. The Governor ensured that the BoC would continue to conduct an independent monetary policy in response to Canada's own economic developments in order to achieve the 2% inflation target. The central bank has a number of tool at its disposal, both conventional and unconventional, to combat threats to the inflation target or to Canada's financial system. Poloz added that movements in exchange rates are helping Canada's economy. The depreciation of Canada's Dollar partly offsets the decline in commodity prices, which are usually priced in US dollars, as well as boosts Canadian-dollar revenues for exporters. There has been a stronger growth in exports of non-commodity goods, which is helping to offset the weakness in the resource sector tied to lower commodity prices. However, this process requires some time to translate into more investment spending and new job creation.
Upcoming fundamentals: Jobs day in US and Canada, followed by Chinese inflation
These are several economic events, which are being closely watched on Friday. Among them, the US and Canadian companies are estimated to increase the number of people employed by 203,000 and 10,400 in December, respectively. In particular, Canadian numbers will follow a surprising plunge of 35,700 in November of the previous year, while a jobless rate could remain flat at 7.1%. US statistics will be expected to bring a positive surprise this time, following the encouraging ADP employment report released Wednesday. All mentioned data releases are due at 13:30 GMT. Meanwhile, UK trade balance will be published at 9:30 GMT. An overwhelmingly negative trade deficit is forecasted to cool down to 10.5 billion pounds in November after a red gap of 11.8 billion pounds one month before. Adding to that, Chinese inflation is due at 1:30 GMT on Saturday. Economists foresee a rebound in consumer prices to 1.7% in December, up from 1.5% in November.
Gold encounters 100-day SMA, faces downside risks
Gold spent another market session in a confident uptrend, as investors attempted to decrease risks in the wake of equity market selloff. A flight to safety pushed XAU/USD as high as 100-day SMA and monthly R2 at 1,107. Positive US fundamentals later on Friday and stock market's stabilization could result in a bearish correction, while short traders are targeting the area below 1,100. A drop below September 2015 low (1,098) is capable of driving prices even deeper down to the next major support cluster at 1,084 (55-day SMA, weekly R2 and monthly R1).Daily chart
It seems that in the one-hour chart the bears are somewhat exhausted for the time being. Following a rally, which pushed gold prices above 200-hour SMA and December 2015 high, the next obstacle (October 2015 high) is feeling more confident to stop the bullion's positive trend. We are closely watching developments around this resistance, as a spike above it can give the bulls a signal to commence another round of purchases.
Hourly chart
More SWFX traders expect the yellow metal to climb
SAXO Bank clients managed to recover only two percentage points for the bulls, whose share went up from 60% to 62% by Friday morning. In the meantime, OANDA distribution between the bulls and bears is still hovering around 70-to-30%.