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Gold to Rise as Oil Falls if NFP, ISM Miss Estimates

Gold to Rise as Oil Falls if NFP, ISM Miss Estimates

Ilya Spivak, Head Strategist, APAC

Crude oil may fall amid broad-based risk aversion while gold pushes higher amid US Dollar selling if US ISM and NFP data fall short of economists’ expectations.

Talking Points

  • Crude Oil, Copper May Fall if NFP and ISM Data Disappoints
  • Gold and Silver Could Rise as US Data Weighs on US Dollar

All eyes are on the US economic calendar in the final hours of the trading week. The Employment report is expected to show Nonfarm Payrolls (NFP) rose 165,000 in January, compared with a 155,000 increase in the prior month. Meanwhile, the ISM Manufacturing gauge is expected to tick narrowly higher to 50.6 over the same period versus 50.2 in December.

Outcomes in line with expectations would fall closely in line with recent trends, offering little that has not been priced in already and implying limited scope for market volatility. US economic releases have increasingly underperformed analysts’ forecasts since late December however (according to data compiled by Citigroup). This seems to suggest market observers’ perceptions are rosier than they ought to be.

If this trend continues and brings disappointments on today’s releases, a breakout of risk aversion across financial markets amid worries about the implications of a slowdown in the world’s largest economy for global recovery at large. That bodes ill for cycle-sensitive commodities including crude oil and copper. It may likewise weigh on the US Dollar by scattering expectations for an early end to the Fed's QE efforts, offering support to anti-fiat assets including gold and silver.

WTI Crude Oil (NY Close): $97.49 // -0.45 // -0.46%

Prices cleared resistance at 97.41, exposing the 100.00 figure and the September 14 high at 100.40. Negative RSI divergence warns of ebbing bullish momentum however and hints a reversal may be brewing. A bearish Dark Cloud Cover candlestick pattern is likewise in play, although confirmation would require a clear back below 97.41. Such an outcome initially exposes 94.61.

Commodities_Gold_to_Rise_as_Oil_Falls_if_NFP_ISM_Miss_Estimates_body_Picture_4.png, Gold to Rise as Oil Falls if NFP, ISM Miss Estimates

Daily Chart - Created Using FXCM Marketscope 2.0

Spot Gold (NY Close): $1663.65 // -13.40 // -0.80%

Prices once again find themselves near major rising trend line support dating back to mid-May (1655.05), but a bullish Morning Star candlestick pattern continues to argue for an upside bias. Near-term resistance is at 1690.39, the 38.2% Fibonacci retracement, followed by the 1700/oz figure and a channel top at 1700.68. Alternatively, a drop below support targets the January 4 low at 1625.69 and the falling channel bottom at 1602.09.

Commodities_Gold_to_Rise_as_Oil_Falls_if_NFP_ISM_Miss_Estimates_body_Picture_3.png, Gold to Rise as Oil Falls if NFP, ISM Miss Estimates

Daily Chart - Created Using FXCM Marketscope 2.0

Want to learn more about RSI? Watch this Video

Spot Silver (NY Close): $31.45 // -0.59 // -1.83%

Prices are edging higher in a narrow upward-sloping channel. Near-term resistance lines up at 32.65, the channel top and a horizontal pivot. A break above that aims for the upper boundary of a larger channel top at 33.41. Near-term support is at 30.95, with a drop below that aims for the 30.00 figure and the major channel bottom at 29.19.

Commodities_Gold_to_Rise_as_Oil_Falls_if_NFP_ISM_Miss_Estimates_body_Picture_2.png, Gold to Rise as Oil Falls if NFP, ISM Miss Estimates

Daily Chart - Created Using FXCM Marketscope 2.0

Want to learn more about RSI? Watch this Video

COMEX E-Mini Copper (NY Close): $3.732 // -0.018 // -0.48%

Prices are testing below the 38.2% Fibonacci expansion at 3.736 once again. A break lower exposes a rising Wedge bottom at 3.658. Near-term resistance is at 3.778, 50% level, with a reversal above that aiming for the 61.8% Fib at 3.820.

Commodities_Gold_to_Rise_as_Oil_Falls_if_NFP_ISM_Miss_Estimates_body_Picture_1.png, Gold to Rise as Oil Falls if NFP, ISM Miss Estimates

Daily Chart - Created Using FXCM Marketscope 2.0

--- Written by Ilya Spivak, Currency Strategist for Dailyfx.com

To contact Ilya, e-mail ispivak@dailyfx.com. Follow Ilya on Twitter at @IlyaSpivak

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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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