- Almost 60% of SWFX market participants are sceptical with respect to gold
- As long as prices keep hovering above 1,220 (March lows), technical outlook is encouraging
- Daily technical indicators are looking for sideways development on Monday
- Economic events to watch over the next 24 hours: FOMC Members Brainard and Fisher Speak; Chinese Trade Balance (Feb); Japanese Final GDP (Q4) and Trade Balance (Jan); Australian NAB Business Confidence (Feb)
Gold traded below last week's 13-month peak on Monday. Bullion's recent rally was halted by strong US employment data that boosted expectations that the Fed could hike interest rates this year. However, the US central bank is unlikely to raise rates as soon as next week during its policy meeting, providing some support to non-interest bearing precious metal. The US economy created more jobs than expected in February, while the unemployment rate remained unchanged, highlighting the ongoing improvement in the labour market. US non-farm payrolls increased by 242,000 last month, compared with economists' expectations for 195,000 new jobs. The unemployment rate held at the lowest level in eight years at 4.9% for the second consecutive month.
Canada's trade deficit rose less than expected in January, as imports increased slightly more than exports, according to Statistics Canada. Canada's trade deficit edged up to C$655 million in January from C$631 million in the preceding month. Analysts, however, had expected a trade gap of C$1.05 billion. January marked the 17th straight monthly trade deficit, reflecting the ongoing economic damage caused by low oil prices. Canada's exports increased for the third month in a row, rising by 1.0% to a record C$46.00 billion amid higher shipments of consumer goods and motor vehicles and parts. Export volumes advanced 3.6% while prices declined by 2.5%. Meanwhile, imports surged 1.1% to C$46.65 billion as nine of 11 sections increased, with gains in motor vehicles and other parts being offset by a drop in aircraft and other transportation and parts. Volumes expanded by 1.6%, while prices declined 0.5%. At the same time, exports to the US, which make up 76.0% of Canada's global total in January, climbed by 2.6%, while imports grew by 1.1%. As a result, Canada's trade surplus with the US grew to C$3.70 billion from C$3.13 billion in December.
Bank of Japan Governor Haruhiko Kuroda said that the central bank will study the effects of negative interest rates on the world's third biggest economy, indicating that no immediate expansion of stimulus was planned. Kuroda also remained upbeat on Japan's economic growth outlook, countering criticism that the central bank's decision to introduce negative interest rates has had little positive impact on markets. Yet, the central banker reiterated that the BoJ stands ready to ease monetary policy again, either by accelerating asset purchases or pushing rates deeper into negative territory, if needed to reach the 2% price goal. Kuroda also added that current negative rates would have a "very powerful" stimulus effect on the Japanese economy by driving down borrowing costs and encouraging firms to boost investment. The "Abenomics" economic strategy of Prime Minister Shizno Abe relies on central bank stimulus to underpin growth, but Abe said that the BoJ has adopted negative interest rates of its own accord, and denied that his policy was unsuccessful, despite low growth and weak inflation. The BoJ unexpectedly cut the benchmark interest rates below zero in January, as turbulent markets and slowing global growth threaten its efforts to overcome deflation.
Upcoming fundamentals: Chinese exports to continue shrinking for an eight month
There are downside estimates with respect to trade data from China, the world's second largest economy. Statistics, which is due to be released at 23:00 GMT on Monday, will likely show a drop in exports of 14.9% in February, while imports is set to plunge by 10% on a yearly basis. This is going to be an eight consecutive month of losses for these particular indicators. Positive gap between exports and imports might have tightened to $51 billion last month from $63.29 billion in the first month of 2016. Meantime, statistics authorities of Japan are forecasted to confirm a declining GDP of the country in the fourth quarter of 2015. Data is due at 23:50 GMT and a quarterly GDP loss is projected at 0.4%.
Gold eases from multi-month peaks
US Dollar strengthened after encouraging employment data from America. Gold peaked at 1,280 on Friday, but came under selling pressure by week-end and finished it slightly below 1,260. Bullish development remains on top of the medium-term agenda, backed by the February uptrend line, currently at 1,229, and the weekly pivot point at 1,251. Moreover, weekly indicators are long on the bullion for the moment. The first target area for the bulls is 1,290 guarded by weekly/monthly R1s. Only a drop below 1,221 (20-day SMA) will erode the positive outlook.Daily chart
Similar to the EUR/USD currency pair, gold's one-hour chart opposes the bullish scenario suggested by the daily outlook. Here the yellow metal hit the Feb 18-24 uptrend near 1,280 on Friday and now a correction lower seems to be on hands. A slide may prolong through the 200-hour SMA at 1,239 with a possibility of testing the Feb 22-26 uptrend at 1,231.
Hourly chart
SWFX sentiment is bearish in almost 60% of all cases
Meanwhile, SAXO Bank's bears had an opportunity to enjoy the majority status for a very short period of time. On Friday their share increased slightly above 50%, but over the weekend the sentiment has changed hands back in favour of the bulls that are now holding 52.4% of all open positions. As for OANDA, here the gap between positive and negative clients has widened to 12 percentage points by the March 7 morning.