- 61% of all SWFX positions are short
- Losses risk extending on Dollar's rebound; weekly PP at 1,272.92 is first to offer support
- Daily technical indicators remain undecided
- Economic events to watch over the next 24 hours: Euro zone Services PMI (Apr) and Retail Sales (Mar); Spanish Unemployment Change (Apr); US ADP Employment Change (Apr), Trade Balance (Mar), Unit Labour Costs (Q1), ISM Non-Manufacturing PMI (Apr) and Factory Orders (Mar); FOMC Member Kashkari Speaks; UK Construction PMI (Apr); Australian Retail Sales (Mar) and Trade Balance (Mar)
Gold traded below a 15-month high on Wednesday as the US Dollar strengthened after two Fed policy makers pointed to two interest rate hikes this year. Atlanta Federal Reserve President Dennis Lockhart said two rate hikes this year are certainly possible. Also, San Francisco Fed President John Williams said he is optimistic about the US economy and was giving little weight to the slowdown in first quarter gross domestic product. Assets of SPDR Gold Trust, the world's top gold-backed exchange-traded fund, increased to their highest since December 2013 on Monday.
New Zealand's first quarter employment data showed unemployment rose as the participation and employment rate also increased. The unemployment rate ticked higher to 5.7% in the reported period, from a revised 5.4% the prior quarter and above the forecast of 5.5%. Despite the increase in unemployment, the data suggested the economy was performing well. The participation rate advanced to 69.0% while employment rose 1.2%. However, of those entering the labour force 10,000 failed to find jobs, while the remaining 28,000 were employed. The cost of labour index rose 1.8% on an annualized basis in the March quarter, up from 1.6% in the three months through December. From the fourth quarter to the first quarter, labour cost grew 0.4%, in line with the prior quarter. In the March quarter, New Zealand's inflation climbed 0.4% on year, meaning real wages are still growing at a strong pace, which is likely to continue to boost consumption. The RBNZ is expecting annual inflation at 1.1% by end-2016, down from the forecast of 1.6% made at its December policy review, and just inside its 1% to 3% target range. Meanwhile, New Zealand house prices continued to rise at a solid pace in April with low interest rates supporting demand for housing. Residential property prices rose 12% year-on-year in New Zealand last month.
The US manufacturing sector expanded at a more moderate pace in April, partly due to a slowdown in new orders, but an increase in export orders to the highest level in more than a year offered hope for the sector. The Institute for Supply Management reported its index of factory activity slid to 50.8 last month, down from 51.8 in March. Despite the decline, April marked the second consecutive month of expansion and was the second highest reading in the last eight months. The US manufacturing sector has been struggling due to a strong US Dollar and moribund global demand. In addition to that, lower oil prices have derailed manufacturers tied to the energy industry. Separately, the Commerce Department reported construction spending rose 0.3% in March to its highest level since October 2007, following an upwardly revised 1.0% gain in February. The US economic growth slowed to a 0.5% annualized rate in the first three months of the year. The revised February construction spending figures appeared to be much higher those used in the advance first-quarter GDP estimate. Economists predict GDP growth for the first three months of the year will be revised up to a 0.7% rate. Given a fairly strong labour market, which is anticipated to underpin tepid consumer spending, economists expect gross domestic product growth to rebound in the second quarter.
Upcoming fundamentals: US data in focus
Gold and Greenback traders are going to follow a bunch of US statistics on Wednesday, with labour market and factory output data carrying the highest level of importance. ADP Employment Change is due at 12:15 GMT, with 195,000 jobs expected to have been generated in April of this year. Trade balance is up at 12:30 GMT and economists suspect the gap between exports and imports will narrow down considerably in March. Meanwhile, at 14:00 GMT we are going to get the ISM Non-Production PMI, which is assumed to show a reading of 54.7 points in April. Factory orders (also 14:00 GMT) are estimated to increase by 0.6% in March, following a sharp 1.7% retreat in the preceding month.
Gold eases for first time in seven days
The bullion failed to set another 15-month record yesterday, after American session was largely marked by the Greenback's rebound. Gold futures closed the trading around 1,286.50, but weakness is at risk of prolonging through the next 24 hours of market activity. The key support is placed at 1,272.92, namely the weekly pivot point, followed by the second demand precisely $20 below it (monthly PP). Dips lower are unlikely, also given that the mentioned monthly pivot is additionally backed by the April 29 low.Daily chart
Despite the first daily decrease of gold prices in seven working days, we are going to maintain a positive view on futures, as long as they are fluctuating above the 200-hour SMA. Currently the moving average is located at 1,261.26 against the spot's 1,279.67 at the moment of writing, but the SMA holds a clear topside trend. When the two encounter each other, the likelihood of more bullish momentum will grow.
Hourly chart
SWFX traders are turning bearish again
OANDA clients continued to drop their long positions with respect to the yellow metal, as Dollar's revival is questioning the possibility of future rallies. At the moment 51.78% of all their positions are short, while about the same amount of all transactions were bullish one day ago. In the meantime, SAXO Bank traders are keeping a negative view on gold in more than 54% of all cases.