- 66% of all SWFX positions are short
- Weekly PP at 1,280.49 and monthly R1 at 1,287.49 are forming the closest supply zone
- Daily and next week's technical signals are bullish
- Economic events to watch over the next 24 hours: German Factory Orders (Mar); Swiss CPI (Apr); FOMC Members Evans and Kashkari Speak; US Labour Market Conditions Index (Apr); UK Halifax HPI (Apr); Chinese CPI (Apr)
Gold slid on Monday, but remain supported amid investors' expectations a weaker US payroll data would urge policy makers to delay an interest rate hike. The US labour market lost steam in April, as the world's biggest economy created the fewest number of jobs in seven months and Americans dropped out of the labour force. Non-farm payrolls rose by 160,000 jobs last month as construction employment barely climb and the retail sector shed jobs.
Bank of Japan policy makers were confident the world's third biggest economy is recovering, but some were concerned about a continued slowdown in consumer inflation, the minutes of the March meeting showed. The BoJ voted to keep monetary policy intact, as officials decided to refrain from any additional surprises that could fuel additional volatility in the domestic and global markets. However, some officials voiced worries over signs of "adverse effects" of negative interest rates, which added to "anxiety among "financial institutions and depositors". They also highlighted that the measure had "exacerbated" market volatility and created "excessive expectations for further monetary easing." The BoJ introduced negative interest rates in January, joining the Euro zone, Sweden, Denmark and Switzerland in adopting the unconventional policy. Since then, Japan has slipped back into deflation, adding further doubts about Abenomics. With Japan sliding back into deflation in March, investors widely expected the central bank to ease policy further at last month's policy meeting. The BoJ did however revise its outlook on economic growth and inflation. Policymakers were cautiously optimistic about the recovery, despite the economy shrinking in two of the past three quarters. Japan's Cabinet Office will release preliminary first quarter GDP figures next week. Japan's economy contracted at an annualized 1.1% pace in the fourth quarter.
The Canadian economy lost 2,100 jobs in April, while the unemployment rate remained unchanged at 7.1%, according to Statistics Canada. The data followed massive employment gains of 40,600 new jobs created in March. On an annual basis, the employment rose by 144,000, led by both full-time and part-time positions. The latest data provided further evidence of a growing regional divergence in Canada, as commodity-reliant provinces like Alberta faced the biggest cuts, while other non-energy dependent areas used the oil price shock to grow. The oil-rich Alberta reported that 21,000 fewer people were employed there. In contrast, 13,000 new positions were added in western British Columbia, which brought the jobless rate down to 5.8%, the lowest level in all the provinces. Economists have been looking to Canada's manufacturing industry to pick up the slack from Canada's resources sector, which has struggled amid low commodity prices. The Bank of Canada projects growth of 2.8% during the first quarter of the year, but warns that the Q1 boost is likely temporary, with much softer gains estimated for the second quarter.
Upcoming fundamentals: FOMC speeches and Chinese inflation for April
Two chiefs of US Federal Reserve banks, Neel Kashari of Minneapolis and Charles Evans of Chicago, are going to speak during both European and American sessions on Monday. They will likely touch economic outlook and monetary policy, while analysts are closely following any hints about the upcoming June FOMC meeting. Speculations are in place, whether the US central bank will increase the benchmark interest rate for the first time this year. In the meantime, Chinese consumer and producer price figures are out in the early morning on Tuesday. Published at 1:30 GMT, inflation in the world's second largest economy is projected to stay flat at 2.3% on a yearly basis in April. A drop of producer prices is expected to slow down to -3.7% in the fourth month of this year from -4.3% in the preceding month.
Gold faces resistance at 1,280/87
Gold futures advanced for the first time in four days on Friday of the previous week, as they were fuelled by soft US payroll numbers for April. However, the bullion's appreciation was stopped by the monthly R1 at 1,287.49, which is strengthened by the weekly pivot at 1,280.49 this week. We are looking for a downward momentum provided by this resistance area. Short-term losses would be allowed to prolong down to 1,269 where XAU/USD is going to meet the weekly S1 along with the May 5 low. On the other hand, daily technical indicators are bullish and they still foresee a price growth.Daily chart
Since April 28 the yellow metal has been constantly trading above the 200-hour SMA; however, the distance between it and the spot has already narrowed down. While above the moving average, gold will be estimated to continue advancing with the ultimate price target at May 2 high of 1,303.65, followed by the 2015 high at 1,307.06. In order to push the outlook to the downside, the bullion has to consolidate below 1,276.62 (SMA) for two days in a row.
Hourly chart
Two thirds of SWFX positions are bearish
OANDA market participants continued to increase the number of positive bets, as since Friday the bullish portion has grown to 55.48%. However, right now 52% of SAXO Bank clients are thinking that the precious metal will correct lower in the foreseeable future.