- Share of long open trades bounced off lowest level in 15 weeks
- Bulls are intended to push the price back above 2014 low
- Closest support lies at 1,124 (55-day SMA)
- Economic events to watch in the next 72 hours: G-20 Meeting in Turkey; German Factory Orders (Jul); Euro zone Final GDP (Q2); US Non-Farm Payrolls, Average Hourly Earnings, Labour Force Participation and Unemployment Rate (Aug); FOMC Member Lacker Speaks; Canadian Net Change in Employment and Unemployment Rate (Aug)
Gold remained under selling pressure on Friday ahead of a crucial US employment report later in the day as investors looked for clues about the US interest rate hike timing. Bullion slid on Thursday as the Greenback rose after the European Central Bank downgraded its economic growth outlook and kept interest rates on hold. The US Dollar was also supported by US jobless claims data, which signalled ongoing improvement in the labour market. Robust economic reports could prompt the Fed to lift rates sooner than later, hurting non-interest-paying gold and boosting the Dollar.
Meanwhile, US trade deficit shrank to the lowest level in five months in July, as exports rose marginally, while imports dropped. The shortfall narrowed to $41.9 billion in July, booking a 7.4% decrease from a June imbalance of $45.2 billion, according to the Commerce Department. Exports climbed 0.4% to $188.5 billion, driven by stronger sales of US-made autos and machinery, while imports declined 1.1% to $230.4 billion. So far this year, the deficit is running 3.6% above the 2014 level, reflecting weaker export sales. Concerns are mounting that US growth will be hurt by further decreases in exports, reflecting a stronger Dollar and overseas weakness, particularly in China.
Upcoming fundamentals: Canadian and US data in focus; G-20 finance chiefs meet in Turkey
Both Canada and US will release important labour market statistics on Friday at 12:30 GMT. With American data forecasted to continue improving across-the-board, Canadian numbers will probably show falling employment and stable jobless rate in August. Meanwhile, president of the Federal Reserve Bank of Richmond Jeffrey Lacker, a FOMC voting member this year, will speak today at the Retail Merchants Association in Richmond. Moreover, finance ministers of the world's 20 largest economies are gathering for a two-day summit in Ankara, Turkey. Discussions are projected to focus on emerging markets, Greek debt crisis and Fed potential rate hike.
XAU/USD intended to drop below 1,124
The precious metal was trading downwards for a second consecutive day on Thursday as it plummeted below the majority of crucial supports in the 1,131-24 area. Among them 2014 low, 20-day SMA and monthly pivot point have already been breached. At the moment bears are focusing on 55-day SMA, the last support in the observed demand zone. Friday's performance will mainly depend on US labour market fundamentals as positive numbers may push gold down to recent lows at 1,117, which are followed by the weekly S1 at 1,110. Despite that, bulls are still hoping to reverse the negative trend and come back above 1,131.Daily chart
In the one-hour chart we observe the price hovering below the 200-hour SMA for a third day in a row, while yesterday the bullion has also violated the 2014 low. Therefore, probability of a bearish outcome by the end of this trading week is increasing. Bulls are in turn required to push the price above the moving average, currently at 1,133, in order to erode our negative outlook.
Hourly chart
SWFX sentiment remains marginally bullish
In the meantime, OANDA share of bulls is staying at 60.58% of all current positions at the moment, while SAXO Bank traders are keeping as many as 65% of long open trades.