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Gold Prices Rejected At July Highs After Stellar NFP

Gold Prices Rejected At July Highs After Stellar NFP

2016-08-05 16:30:00
Tyler Yell, CMT, Currency Strategist
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Talking Points:

Commodities often play an opposite role to the US Dollar, give that is the base currency from which they’re priced. An oversimplified example is when Gold high $1,920/oz in September 2011 and Oil was ~$114/bbl was near the US Dollar’s nadir.

Friday’s Non-Farm Payroll Print +255k, which exceeded all forecasts by Bloomberg economists. Now, we will look to next week to see if commodity weakness is beginning again, or if the first week of August was a simple one-step back after two steps forward over the past few months.

Where are gold and crude oil prices heading in the second quarter? See our forecasts here!

GOLD TECHNICAL ANALYSIS:As of mid-day Friday, Spot Gold (CFD: XAUUSD) was down ~1.6% or $21.50. Much of the fall was due to the fear of a stronger dollar on the after two very strong Non-Farm Payroll numbers were released for both May & June.

Given today’s ~1.6% drop, the trend higher still seems unperturbed. A trendline drawn off the extreme lows in June looks to be supporting prices, and only a break of $1,312.05 (mid-July low) would change our tone from Bullish to Neutral. The price channel and Ichimoku drawn on the chart below show what outsides of the short-term volatility, prices continue to print higher lows, which are hallmarks of markets not to sell.

Gold Prices Rejected At July Highs After Stellar NFP

CRUDE OIL TECHNICAL ANALYSIS – Crude oil prices broke below support at the 200-DMA at $40.38/bbl earlier this week. Since the break, Crude Oil prices have oscillated around this key zone, but the dual-threat of a stronger US Dollar on the back of two very impressive NFPs and fear of oversupply re-emerging seem to imply the path of least resistance is lower.

The zone highlighted on the chart below aligns with the March price correction from $41.87/bbl-$35.22/bbl. If the Bullish Trend from Feb-June is set to resume, a prior correction (like the one highlighted below) is a likely place for a reversal to form. However, because we’re at the top of the zone, buying now could be very risky. As noted yesterday, a break above the 100-DMA ($44.77/bbl) would shift the bias to begin favoring upside again. However, this would likely need to align with renewed US Dollar weakness, which may be hard to obtain.

Gold Prices Rejected At July Highs After Stellar NFP

--- Written by Tyler Yell, CMT. Currency Analyst for DailyFX.com

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

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