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Dollar Up, Investors Brace for Latest U.S. Jobs Report

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Upward Trendline Supports Gold at $1,807 – Quick Trade Plan

The gold prices closed at $1,814.45, after placing a high of $1,835.85, and a low of $1,809.50. The precious metal reached its highest level since July 15 during the early trading hours, on the back of the declining US dollar. However, during the late American session, after the release of US macroeconomic data and the comments by a top Fed official, the greenback gathered strength and reversed its course, causing the yellow metal to lose all of its daily gains. Federal Reserve Vice Chairman Remarks on Policy The precious metal shed its early gains on Wednesday, after the Vice Chairman of the Federal Reserve said that the economic targets set by the central bank were likely to be achieved by the end of next year, and that interest rate increases would begin in 2023.

XAU/USD While Clarida remained reluctant to give any timetable for when the Fed might start reducing its asset purchases of $120 billion per month, in an effort to keep financial markets liquid in the wake of the coronavirus crisis, he also mentioned that Fed officials were discussing when they could pull back on those bond purchases.He elaborated further, saying that investors and traders would be given plenty of notice before any such decision was made, so they should not worry about it. This comment came in after growing concerns over the economic recovery peak that began in April 2020, and the rising inflation that took the prices even higher than the Fed’s target. These comments by Richard Clarida added extra strength to the US dollar, pushing it higher, which ultimately weighed on the yellow metal prices.

ADP Non-Farm Employment Change Supports Gold On the data front, at 17:15 GMT, the ADP Non-Farm Employment Change for July came in, showing a drop to 330K, against the expected 695K, which weighed on the greenback and reduced the losses in the GOLD prices. At 18:45 GMT, the Final Services PMI was released. It remained flat, in line with the expectations of 59.9.

At 19:00 GMT, the ISM Services PMI showed a surge to 64.1, against the forecast of 60.5, supporting the US dollar and dragging the XAU/USD even lower for the day.

The jobs data came in against the US dollar, falling short of the expectations; however, the non-manufacturing PMI data from the Institute for Supply Management offset the jobs data, pushing the greenback higher, as the reading reached its highest level in history.

The US Dollar Index, which gauges the greenback’s value against a basket of six major currencies, rose on Wednesday, reaching 92.31, after declining for the previous two consecutive sessions. The rise in the greenback could be attributed to the better-than-expected ISM Services PMI data and the Fed Vice Chairman’s positive comments. The surge in the prices of the greenback kept the precious metal under pressure for the day.

Gold -XAU/USD – Daily Technical levels Support         Resistance 1,803.41        1,830.66 1,792.38        1,846.88 1,776.16         1,857.91 Pivot Point:  1,819.63 Gold -XAU/USD – Technical Analysis – Ascending Trendline Supports at $1,807 GOLD is trading at 1,810, and gaining support over the 50 periods EMA level of 1,807. A bearish breakout at this level could extend the selling trend until the next support level of 1,793. At the same time, the resistance remains at 1,819. The downward trendline extends resistance at the 1,819/20 level; however, a breakout at this level could drive more buying until 1,833. The MACD and the RSI are in a selling zone, supporting odds of a continuation of the selling trend. On Thursday, we should keep an eye on the 1,807 level, as above this, the bullish bias will continue to be solid.

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Gold Down, Investors Look Ahead to Latest U.S. Jobs Report

Gold was down on Monday morning in Asia, as the dollar hovered near a one-month low. The health of the U.S. labor market is also on investors' minds as they await the country’s latest job report.

Gold futures were down 0.27% to $1,812.35 by 1:31 PM ET (5:31 AM GMT), rolling over to the Dec 21 contract on Aug. 1. The yellow metal retreated from a two-week high on Friday as the dollar strengthened from a one-month low.

The dollar, which usually moves inversely to gold, inched down on Monday. It was down 0.8% during the previous week, its worst weekly performance in over two months. 

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US Dollar Under Pressure After Powell Reiterates Dovish Stance

Early on Thursday, the US dollar is trading under pressure after Fed chairman Jerome Powell maintained his dovish stance, indicating that he has no plans to consider hiking interest rates anytime soon. At the time of writing, the US dollar index DXY is trading around 92.15.

At the end of the latest policy meeting, the US central bank offered more confidence in the economic recovery currently underway through the nation. However, Powell played down any possibility of a hawkish shift in the near future, maintaining that the labor market had more catching up to do before he could even consider a rate hike.

After trading bullish over the past few weeks, the rally in the US dollar appears to have come to a pause after the FOMC statement, driving renewed strength in other leading currencies. The biggest gainer has been the Pound Sterling, with GBP/USD making the most of the increased investor confidence after the UK economy’s recent reopening.

The Cable is back above the key $1.39 level despite the rising number of COVID-19 infections across the UK. Investors continue to cheer the government’s decision to reopen the economy even though the government continues to adopt a cautious approach.

Meanwhile, the greenback’s safe haven appeal has also come under pressure after a recent report in Bloomberg about how China’s securities regulator held a discussion with leading investment banks to offset the recent sell-off seen in the nation’s stock markets. China’s key stock indices turned extremely bearish over concerns that the government was going after the private education sector, leading companies to worry that such a move could target other industries as well.

However, the improvement in the risk sentiment has failed to make much of an impact on leading commodity currencies AUD and NZD, with the AUD trading weak owing to an extension of Sydney’s lockdown. The safe haven Japanese yen continues to enjoy support over concerns about the economic impact of the delta variant of the coronavirus.

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Will the Latest Lockdowns Cause RBA to Reverse its Decision on Tapering Bond Buying?

Will the RBA overturn its decision to start tightening stimulus measures in the wake of the latest round of lockdowns to combat the spread of the delta variant of coronavirus? Economists at leading Aussie banks expect the central bank to reverse its decision to taper its bond purchases if the lockdown extends and hurts economic recovery Down Under.

With the Australian economy posting a faster recovery than several of its peers, the RBA had announced a decision earlier this month to reduce its bond buying from AUD 5 billion per week to AUD 5 billion per week starting from September. However, over the past few weeks, nearly half of the country has reimposed lockdowns, including Sydney, which could dent the pace of recovery from the coronavirus-induced crisis.

Analysts forecast that the Australian economy could witness a contraction during Q3 2021, the first contraction since Q2 2020. In case the economy is headed towards contraction, it would be premature of the RBA to withdraw stimulus efforts and would need to look at ways to continue supporting the economy.

Although the Aussie central bank had announced its decision to start tapering bond purchases, it left open the possibility of remaining flexible about this plan. This has further raised the possibility that it could announce a reversal of this decision in the upcoming meeting scheduled for August.

Impact on the AUD The AUD has been trading weak over the past few days amid growing concerns about the economic impact of the spread of the delta variant, not only on Australia but across the world. This has driven markets into a risk-off mood, sending investors away from riskier currencies like the Australian dollar and towards the safety of instruments like the USD, JPY and gold.

AUD/USD A reversal of the RBA’s decision on tapering bond purchases could spell further weakness in the AUD in the coming weeks. However, once the lockdowns are eased and the Aussie economy bounces back more rapidly than other countries, investor confidence in its currency could rebound again.