- 68% of all SWFX positions are short (71% on May 5)
- Second fail to violate weekly PP at 1,272.92 decreases downside risks even further
- Daily and next week's technical signals are bullish
- Economic events to watch over the next 24 hours: US Non-Farm Employment Change, Average Hourly Earnings and Unemployment Rate (Apr); Canadian Ivey PMI (Apr), Employment Change (Apr) and Unemployment Rate (Apr)
Gold was set to record its biggest weekly drop in six weeks on Friday as the US Dollar strengthened ahead of the US non-farm payrolls report. A strong payrolls data could encourage the Fed to hike interest rates sooner than later, hurting non-interest paying gold. For the week, the precious metal was set for a 1.2% decline, its biggest weekly drop since the week ended March 25. Meanwhile, investor sentiment toward gold appeared to be bullish with assets of SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, climbing to 829.44 tonnes on Thursday to the highest in over two years.
Canada's building permits declined in March due to fewer planned projects in western Alberta, particularly within the commercial sector. According to Statistics Canada, the value of building permits issued by municipalities in March plunged 7% to $6.9 billion. The drop followed a revised 15.3% surge in February. The data was worse than the 4.4% decrease predicted by economists. The value of permits issued in Alberta, dramatically hit by a plunge in crude prices, dived by 41.3%. This followed a 43.3% surge in February on the back of a big commercial project in the city of Edmonton. Canada's exports fell sharply in March and the country's trade deficit with the rest of the world widened to a record level, fuelling doubts on the strength of the recovery in the resource-reliant economy. Canada posted a record trade deficit of C$3.41 billion in March, Statistics Canada reported, whereas expectations were for a smaller C$1.4 billion trade deficit. Exports dropped 4.8% following a dramatic 6.6% decline in the preceding month. In the meantime, imports fell 2.4% to C$44.4 billion in March, with volumes edging down 0.3% and prices declining 2.1%. 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.
The Reserve Bank of Australia revised sharply downwards its inflation forecasts after slashing interest rates just days earlier due to weak first-quarter inflation data. Nevertheless, the central bank said that the Australian Dollar's sharp depreciation over the last few years is expected to continue to put upward pressure on prices. The central bank cut the official cash rate by 25 basis points to 1.75%, after keeping rates on hold for a year. The decision came after the Australian Bureau of Statistics released quarterly CPI data, showing headline inflation plunged from 1.7% in the final quarter of 2015 to 1.3% last quarter. Australia's weak inflation environment could see the RBA taking interest rates even lower if the central bank's weak underlying CPI outlook materializes. The RBA downgraded its inflation forecasts, from expecting underlying inflation to remain within the target range, albeit at the lower end until the fourth quarter of 2016, to now anticipating 1-2% underlying CPI inflation for the year ending December 2016, and 1.5-2.5% inflation for the rest of the forecast period. While the RBA's inflation forecasts were significantly lower than the previous estimated, the bank's economic growth outlook was largely unchanged. In the short term, the RBA predicts slightly stronger growth of around 3%, but left its longer-term GDP forecasts intact at 2.5-3.5%.
Upcoming fundamentals: US and Canadian employment data for April
American employers are due to create 200,000 new jobs in April, down from the pace of 215,000 over the preceding month. However, much weaker-than-estimated ADP numbers that were published back on Wednesday are indicating that private payrolls could possibly be soft last month. Some economists are noting that with the US economy moving towards full employment, the tendency of positive job creation is unlikely to be sustained at the levels above 200,000. As for US wage growth, the mean forecast among investors is a 0.3% rise month-on-month, the same as in March. Canadian employers, however, are suggested to add only 1,000 new jobs in the month of April after 40,600 new jobs that were created a month before. Unemployment rate in the country is projected to grow to 7.2% from 7.1%.
Gold: second attempt to cross weekly PP fails
For a second day in a row on Thursday the yellow metal was unable to overcome the closest support line represented by the weekly pivot point at 1,272.92. This is going to raise doubts about the actual strength of the bearish camp. Along with positive daily and weekly technical signals, we are looking for a minor rebound on the last day of this working week, also because the weekly PP is immediately backed by the monthly pivot, which is unlikely to let the bears succeed. The 2015 high at 1,307.06 seems out of reach for the moment, and firstly gold should attack the yesterday's peak at 1,286.42.Daily chart
The gap between the 200-hour SMA and the spot price has not been closed completely yet. It is one more fact that will support the recovery case. However, bearish intention is to push the precious metal below 1,270.90 (SMA), thereby consequently increasing downside bets.
Hourly chart
SWFX bulls are up to 32%
OANDA market has recovered further from the lows we had observed 48 hours ago, as the distribution is favouring the bulls again by the margin of more than 7%. Today 53.46% of all positions are long on gold. Similarly to that, SAXO Bank clients are 52.28% bullish today, slightly down on a day-to-day basis.