Last month's nonfarm payrolls (NFP) data showed the US economy added 530K jobs in June. The number of jobs caught many off-guard as it was more than double what the market expected.
July’s NFP report, which will be released this Friday, Sept. 2, is forecast to deliver 300K jobs. Will the NFP beat forecasts once more? And if it does, how will investors and traders react, now that they must fold this strong jobs data into their predictions and anticipation of US Federal Reserve rate hikes?
Two instruments that might be expected to move in the lead up to, and directly after, the NFP data release are the GBP/USD and XAU/USD (gold).
Technical analysis for the GBP/USD shows that this pair may continue to move towards the downside in the lead-up to the NFP. Last week, the pair created a new low on the four-hour chart for its current consolidation zone. The GBP/USD pair closed below 1.1751 between the 78.6% and 100% levels on the Auto Fib Retracement Indicator.
The cause for the GBP/USD pair's last two bearish candles may have been Jerome Powell’s speech at Jackson hole, which also is being blamed for the 1000-point (or 3.0%) fall in the Dow Jones Industrial Average. Powell pledged that the Federal Reserve would “use our tools forcefully” to attack inflation in his speech.
If the US dollar remains bullish than the British pound, we can watch for breaks at 1.1717 and 1.1673.
Similarly, gold failed to close above the 61.8% level of the Auto Fib Retracement Indicator at $1742.11/oz on the 4-hourly chart. A solid bearish candle printed on Friday helped to push the metal from 38.2% to its current position and engulf the 3-days' worth of gains that gold previously posted.
With the NFP data due this coming Friday, the price of gold might pierce below 1735.76 before potentially tapping the 100% level at 1727.68. The 100% fib retracement level is critical to watch as it is generally a strong demand zone on the weekly timeframe. Price targets could be 1717.41 if the supply zone at 1727.67 doesn’t live up to its expectation.