- 69% of all SWFX positions are short
- Friday's trading is concentrated around dense technical area at 1,263/69; closure above and below it will set neutral and bearish outlooks, respectively
- Daily and weekly technical signals are bullish
- Economic events to watch over the next 24 hours: German CPI (Apr) and Prelim GDP (Q1); French Non-Farm Payrolls (Q1); Italian Prelim GDP (Q1); Euro zone Flash GDP (Q1); ECB Vice-President Constancio Speaks; MPC Members Haldane and Weale Speak; US Retail Sales (Apr), PPI (Apr) and University of Michigan Preliminary Consumer Confidence Index (May); FOMC Member Williams Speaks
Gold climbed on Friday after losing more than 1% in the previous session, but was set for its biggest weekly decrease since March as a stronger US Dollar undermined the precious metal's allure. The Greenback received support from Boston Federal Reserve President Eric Rosengren comments that the Fed should hike interest rates if data confirms a stronger jobs market and inflation outlook in the second quarter. In addition to that, Kansas City Fed President Esther George said interest rates are too low for the current US economy. She said she supports gradual rate hikes, adding that low rates can create economic risks.
The number of Americans filing for unemployment benefits increased last week to a more than one-year high. Economists argued that striking telecommunications workers were possibly the main driver of a rise and said the data did not suggest a deterioration in the overall labour market. Initial jobless claims surged 20,000 to 294,000 in the week ended May 7, the Labor Department reported. That marked the highest level since February 2015. Weekly claims have risen for three weeks in a row. Yet, claims have remained below 300,000 for more than a year, extending the longest such streak since 1973. The four-week moving average of claims, considered a better measure of labour market trends as it smoothes out weekly volatility, increased 10,250 to 268,250 last week, the highest level in almost three months. Meanwhile, Kansas City Fed President Esther George said interest rates are too low for the current US economy. She said she supports gradual rate hikes, adding that low rates can create economic risks. Low rates can cause interest-sensitive sectors to take on too much debt and grow quickly. George votes on the Fed's policymaking committee and was the only member to vote for a rate lift at the April and March meetings.
The Bank of England warned Britain's economy would slow sharply, and could even slide into recession, if Britons voted to leave the European Union. The central bank added the Pound could decline sharply, while unemployment would probably climb. Consumers could delay spending and companies may postpone investment decisions. BoE Governor Carney said there were limits to what the BoE could do in response to an "Out" vote. Opinion polls show British voters have been relatively resistant so far to warnings about the economic costs of Brexit, with voting intentions in many polls roughly evenly split. The Bank of England's May Inflation Report estimates that inflation will return back to the 2% goal by mid-2018, with the Brexit uncertainty weighing on the short-term growth outlook. Given the current threats, even with the UK remaining part of the EU, the BoE is not expected to hike interest rates before 2018. Also, the BoE revised down its outlook for short-term growth to 2% in 2016, from 2.2% predicted in February. At the same time, the BoE also lowered the GDP outlook for 2017 to 2.3%, from 2.4%, and to 2.3% from 2.5% in 2018. All forecasts in the May Inflation Report were made assuming that the British voters will support continued membership in the EU in the referendum.
Upcoming fundamentals: US retail sector to recover substantially in April
A bunch of American statistics is getting ready to be announced at 12:30 GMT on Friday. Retail sales in the country are estimated to surge by 0.8% on a monthly basis in April, followed weak figures posted in March when they dipped by 0.3%. Core retail sales, which exclude cars, are projected to increase by half a percentage point after a 0.2% rise in the previous month. On top of that, producer prices are likely to climb in April by 0.3% on a headline basis and by 0.1% on a core basis. They both will follow negative changes registered back in March. As for the University of Michigan's consumer sentiment index, analysts foresee a rebound to 89.5 points in May from 89 in April. This is going to be the first of two readings of this indicator, released at 14:00 GMT.
Gold undecided around monthly pivot point
Bullion prices are quite volatile this week, as gains are quickly changed by massive sell-offs. Yesterday XAU/USD corrected lower into the 1,263/69 area where it encountered the monthly pivot along with the 20-day SMA and weekly S1. Because of closing above the lower bound of this zone, gold should recover beyond 1,269 in order to avoid a deterioration of the outlook and pessimistic expectations. Ability to do that will revive hopes for a rally up to this week's current peak near the weekly pivot at 1,286.49. In support of that, fresh daily and weekly technical studies are giving signals to buy gold.Daily chart
Yellow metal is poised for an advance up to 1,285 in the foreseeable future, if it continues to fluctuate within the broadening falling wedge pattern. However, the 200-hour SMA will try to prevent the bulls from accomplishing this goal, as it generates negative atmosphere around 1,277. Initial losses should start with tackling the May 10 low at 1,256.72, with both May downtrend and March-April uptrend following as the next demand at 1,245.
Hourly chart
69% of the market is short on gold
Meanwhile, OANDA clients are overwhelmingly positive (61.6%) with respect to gold. On top of that, SAXO Bank clients have expanded their advantage to the levels that are above 56%, up from 52% one day ago.