- Gold defended $1,300 this week, but the relief could be short-lived.
- The payrolls figure missed estimates, but the June Fed rate hike is still on the table.
- The dollar index seems to have found acceptance above the long-term descending trendline.
- The US 10-yr treasury yield remains on the hunt for a big break above 3 percent.
Gold defended the psychological support of $1,300 (also the double top neckline) this week, but the fundamental factors and the inter-market analysis suggest the bears could soon take out the key support.
The non-farm payrolls released today showed the US economy added 164K jobs in April vs 192K expected. So, the headline number did miss estimates, still, the dollar remained bid, possibly because the headline number when viewed against the backdrop of sliding jobless rate (fell to 3.9 percent in March), indicates falling slack in the labor market.
Moreover, The 150,000 two-month NFP average remains comfortably above the roughly 120,000 increase needed to meet working-age population growth, according to Reuters report. Further, the unemployment rate (includes discouraged workers and those holding part-time positions) fell to 7.8 percent - the lowest level since July 2001.
So, the NFP report won't prevent a June rate hike. Meanwhile, the average weekly earnings (wage growth) rose 2.6 percent year-on-year, narrowly missing the estimate of 2.7 percent. The stagnant wage growth, though a cause of concern, is unlikely to kill June rate hike bets.
Markets still expect the Fed to hike rates in June and deliver another rate hike in the second half of this year. So, gold will likely remain on the back foot in the near-term.
Gold Daily chart
The repeated bull failure favors double top breakdown. The 5-day moving average (MA) and the 10-day MA are trending southwards, indicating a bearish setup.
The related markets aren't helping the matters either. For instance, the dollar index has cut through the long-term descending trendline, signaling a bearish-to-bullish trend change, as seen in the chart below.
Dollar index daily chart
The trendline sloping downwards from January 2017 high and March 2017 high has been breached. The bullish breakout, coupled with the talk of the June Fed rate hike will likely yield a rally to 94.22 (Dec. 12 high) over the next few weeks.
US 10-year Treasury yield weekly chart
Meanwhile, the 10-year treasury yield seems to have found acceptance above the inverse head-and-shoulders neckline and it is only a matter of time before it breaks above 3 percent in a convincing manner.
The rising yields and rising US dollar is gold-negative and vice versa. Thus, the probability that metal will drop below the $1,300 confirming a double top breakdown is high. A close below $1,300 would open the doors to $1,240 (double top breakdown target).
However, the 50-week MA, 100-week MA and the 200-week MA are aligned in favor of the bulls. So, the downside post-double top breakdown could be capped around $1,270.
On the higher side, a move above the 10-week MA would signal bearish invalidation, while a bull revival is seen only above $1,380.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended Content
Editors’ Picks
AUD/USD holds above 0.6500 in thin trading
The Australian Dollar managed to recover ground against its American rival after AUD/USD fell to 0.6484. The upbeat tone of Wall Street underpinned the Aussie despite broad US Dollar strength and tepid Australian data.
EUR/USD comfortable below 1.0800 lower lows at sight
The EUR/USD pair lost ground on Thursday and settled near a fresh March low of 1.0774. Strong US data and hawkish Fed speakers comments lead the way ahead of the release of the US PCE Price Index on Friday.
Gold price finishes Thursday’s session set to reach new all-time highs
Gold price rallied during the North American session on Thursday and hit a new all-time high of $2,225 in the mid-North American session. Precious metal prices are trending higher even though US Treasury yields are advancing, underpinning the Greenback.
Bitcoin price extends retreat from $69K as old whales shift their holdings to new whales
Bitcoin price continues to move further away from the $69,000 threshold, gaining ground as BTC bulls hope for a retest of the $73,777 peak. This is because of the general assumption that clearing this blockade would set the tone for a reach higher, marking a new all-time high.
Bears have been standing before a steamroller so far this year
Despite a pushback on rate cuts from Christopher Waller, and what was supposed to be cautious trading sentiment ahead of critical US inflation data released later on Friday, the S&P 500 rose on Thursday, marking its best first-quarter performance in five years.