Gold stays in short-term range as traders look for US employment signals

Middle East tensions, rate uncertainty and pre-data anxiety put pressure on risk-takers

Early Thursday, markets are experiencing typical pre-NFP anxiety, leading to a re-evaluation of recent trends. Adding to the complexity, Israel is prepared to use significant military and strategic measures against Iran. Furthermore, questions surrounding the Bank of Japan's (BoJ) potential hawkish shift, along with uncertainty about further rate cuts from the Federal Reserve (Fed) and European Central Bank (ECB), are limiting market momentum, especially during China’s holidays. Traders are treading carefully as they await this week’s key data.

US Dollar edges up as dovish Fed bias faces new challenges

The market's indecision is weighing on previous risk-on sentiment, helping the US Dollar consolidate its September losses. Wednesday’s strong ADP Employment Change report, along with US port strikes, provided support for the Greenback, which was already boosted by Fed Chair Jerome Powell’s stance against two potential 0.50% rate cuts in 2024. However, comments from Richmond Fed President Thomas Barkin are adding to a pre-NFP consolidation, posing challenges for dollar buyers. Despite this, the US Dollar Index (DXY) is rising for the fourth consecutive day as bulls target a one-month high.

EURUSD slumps on ECB woes, GBPUSD weighed down by UK pessimism while USDJPY rallies on BoJ speculation

The US Dollar's rally is weighing on the Euro (EUR), British Pound (GBP), and Japanese Yen (JPY), each facing its own challenges. Downbeat Eurozone inflation and growth figures are fostering a dovish outlook for the ECB, pushing EURUSD to a month’s low.

In the UK, the Financial Policy Committee (FPC) has raised concerns about the domestic financial system amid fears of a global economic downturn, impacting GBPUSD prices.

Meanwhile, USDJPY experienced its largest daily jump since June 2022, as Japan's incoming Prime Minister denied plans for aggressive rate hikes. BoJ policymaker Naguchi emphasized the need for easy monetary policy, adding support to the Yen pair’s upside movements.

Antipodeans Set for Weekly Loss Amid US Dollar Strength and Risk Aversion

The Australian and New Zealand dollars are poised for a weekly loss due to the strong US Dollar, China’s absence from the market, and prevailing risk aversion. These factors are creating headwinds for the Antipodeans as traders navigate uncertain conditions. It’s worth noting that growing concerns about Australia’s economic hardships and the Reserve Bank of New Zealand’s (RBNZ) heavy rate cuts add strength to the bearish bias about the AUDUSD and NZDUSD.

USDCAD is on track for its first weekly gain in three, as expectations of more significant rate cuts from the Bank of Canada (BoC) compared to the Federal Reserve outweigh the recent rise in crude oil prices.

Gold appears sticky, Crude Oil rallies on geopolitics, OPEC+ news

Gold experiences its most lackluster week of 2024, struggling to navigate market uncertainty against a firmer US Dollar. Additionally, holidays in China are challenging the precious metal's momentum. Currently, gold is breaking a three-week uptrend and defending its earlier pullback from record highs, indicating a potential for further price corrections if the latest market conditions persist.

Crude oil is reversing previous weekly losses, driven by the Israel-Iran conflict and OPEC+ resistance that surprises energy markets. Notably, the oil cartel dismissed speculation about targeting a $50.00 price, which has strengthened oil's rally alongside recent inventory draws.

Bitcoin, Ethereum snap three-week uptrend

Like other risk assets, Bitcoin (BTC/USD) and Ethereum (ETH/USD) are bracing for their first weekly loss in four, influenced by a firmer US Dollar and a hawkish Fed outlook. However, optimism in the US crypto industry and significant inflows into ETFs prevent a steeper decline.

Latest moves of key assets

• WTI Crude oil prints three-day winning streak while posting mild gains near $71.20 by the press time.
• Gold lacks momentum near $2,650 while challenging the previous three-week uptrend.
• The USD Index braces for the biggest weekly gain in six months, up for the fourth consecutive day near 101.80 at the latest.
• Wall Street closed mixed but the Asia-Pacific shares drifted lower. Further, European and British equities lack momentum of late.
• BTCUSD and ETHUSD both print mild gains to pare weekly losses around $61,300 and $2,390 respectively.

Mid-tier data will entertain momentum traders ahead of Friday’s US NFP

A range of US data will fill the economic calendar on Thursday, keeping momentum traders engaged. However, all eyes will be on Friday’s US employment report for September, particularly the Nonfarm Payrolls (NFP), which is expected to be a significant market mover.

Thursday's spotlight will be on US Factory Orders for August, ISM Services PMI for September, and weekly Jobless Claims. The recent uptick in ADP Employment Change has raised questions about the US jobs market's strength, prompting US Dollar buyers to look for solid incoming data to support their gains ahead of Friday’s employment report. Strong results could drive continued market momentum.

For Friday’s Nonfarm Payrolls (NFP), no major changes are expected, but the stronger ADP data has boosted optimism among US Dollar bulls. They’ll be looking for figures above 140K to maintain their momentum. The Unemployment Rate is likely to remain steady and may not be a significant factor unless there’s a drastic shift. However, if Average Hourly Earnings come in line with market forecasts and soften, it could challenge the recent strength of the Greenback.

Overall, if the US employment report indicates stability for September, the recent hawkish sentiment around the Fed will likely strengthen, allowing the US Dollar to maintain its gains. However, any disappointment in the data could quickly reverse this trend, erasing much of the Greenback's strength and enabling commodities and Antipodeans to regain upward momentum.

More importantly, Gold prices are staying above the $2,630 resistance-turned-support level and are poised to reach fresh record highs around $2,700. The movement will likely be influenced by any softer US data and fluctuations in the US Dollar.

Predictions for Key Assets

• Recovery Expected: USDCAD, USDJPY, US Dollar, Silver
• Further Downside Likely: AUDUSD, NZDUSD, GBPUSD
• Mostly Sideways Expectations: BTCUSD, ETHUSD, Nasdaq, Gold, DJI30, USDCNH
• Slow & Gradual Fall Expected: DAX, FTSE 100, EURUSD, Crude Oil

May the trading luck be with you!