- A selloff was positive for SWFX market sentiment, which is now 56% bullish on gold (55% yesterday)
- US important economic data is in focus on Friday; more volatility expected in the second part of the day
- Aggregate weekly technical indicators are bearish on gold, although a recovery in assumed on a daily basis
- Economic events to watch in the next 24 hours: Spanish CPI (Dec); Italian CPI (Dec); Euro zone Trade Balance (Nov); ECOFIN Meeting; US Retail Sales (Dec); PPI (Dec), NY Empire State Manufacturing Index (Jan), Industrial Production (Dec), Business Inventories (Nov) and Reuters/Michigan Manufacturing Index (Jan); FOMC Member Dudley Speaks; BOE Credit Conditions Survey (Q2)
The number of Americans applying for unemployment benefits unexpectedly jumped last week, a sign labour market momentum may be starting to wane. Initial jobless claims rose by 7,000 to 284,000 in the week ended January 9, the second-highest level since July, according to the Labor Department. Economists, however, had predicted a decrease to 275,000. The increase likely reflects volatility rather than a change in labour market conditions, as the data is difficult to adjust during holidays. Claims also tend to increase at the start of each quarter. The four-week moving average of claims, considered a better measure of labour market trends as it strips out week-to-week volatility, increased 3,000 to 278,750 last week. Still, it was the 45th consecutive week that claims remained below the 300,000 mark, which is associated with strong labour market conditions. That is the longest such stretch since the early 1970s. Concerns that a slowdown in China and other emerging economies will limit prospects for US growth have shacked stock markets and may prompt some employers to cut back. Furthermore, the number of people still receiving benefits after an initial week of aid rose 29,000 to 2.26 million in the week ended January 2. The four-week moving average of the so-called continuing claims increased 5,250 to 2.22 million.
Japan's core machinery orders plunged the most in 18 months in November following strong increases in previous months, adding to uncertainty over the outlook as domestic demand remains sluggish, while China's downturn dims global growth prospects. Core orders, a leading indicator of business investment, dropped 14.4% on month, compared with economists' expectations for a 7.9% decline. In annual terms, orders increased 1.2%. China's slowdown and plunging oil prices rattled global markets at the beginning of the year, fuelling concerns of deepening slowdown in the world economy and potentially dimming confidence at Japanese companies. Uncertainty over the outlook could lead Japanese firm to further postpone implementing their spending plans. Companies surveyed by the Cabinet Office have predicted core orders would rebound to a 2.9% increase in the final three months of 2015, after a 10% decline in the prior quarter. The BoJ has predicted capital investment will surge 8% in the fiscal year ending March, but recent data show it grew only at a pace of 1-2% in April-September. The world's third biggest economy narrowly escaped a recession in July-September. It is expected to continue moderate growth in the last quarter, but some economists highlighted the risk of a contraction due to weak consumption and slack capital spending.
Upcoming fundamentals: An ultra-busy day for US statistics
The commodity market is estimated to be underpinned by many vital statistical indicators throughout the whole US trading session on January 15. The news-flow will begin with the New York Empire State Manufacturing Index, retail sales and producer prices at 13:30 GMT. Separately, the Empire State indicator for manufacturing has probably improved for a fifth consecutive month, up to -4.1 points this month from -4.6 points in December. According to economists, US retail sales are set to drop by 0.1% in December on a headline basis, underlying a quite weak pre-Christmas shopping season. On the core basis, sales are estimated to continue growing by 0.2% after a rise of 0.4% in November. As for the producer price index, market experts see this indicator down by 0.2% in December in terms of a one-month change. At 14:00 GMT in the afternoon the New York Fed President William Dudley will speak at the Economic Leadership Forum in New Jersey. The next batch of data will be out at 14:15 GMT when industrial production is expected to show a fall of 0.2% in December, marking a fifth month of monthly drops. Meanwhile, US consumer sentiment index released by the University of Michigan is expected to be broadly flat in January at 92.7 points, up only one tenth of a percent since December.
Gold's decline is repeatedly stopped by 55-day MA
Bearish sentiment dominated in the market on Thursday, being that gold slumped below 1,075 for the first time in eight trading days. Eventually prices, which started depreciating from the weekly PP at 1,092, were contained by 55-day SMA at the end of US session. Early in the Asian session on Friday we are observing some mild gains, meaning the moving average is holding strong for the moment. Short-term bullish case is expected by daily technical indicators, but any positive surprise from US statistics later today could put at risk any recovery and expose the area below yesterday low of 1,071.50.Daily chart
XAU/USD completed a perfect movement inside the bearish channel in the one-hour chart. Now it is coming back from the pattern's lower edge placed near 1,073. However, we would allow for the selloff to resume when gold regains the 1,088/91 area. There it is going to meet the pattern's upper trend-line, 2015 Dec high and 200-hour SMA.
Hourly chart