Key events

Non-Farm Payrolls which is due tomorrow morning at 8.30 a.m. ET will be the main driver for the final market movements as the week comes to an end, with a declined in expectations to 250k new jobs created versus 372k in the previous print. With a weaker outlook for the labour market, a continued hike in interest rates may drag the economy into a recession which may cause the Fed to be more conservative in their monetary policies and rate hikes. With that being said, if the actual print is lower than the forecasted, USD may lose strength due to a lower probability of Fed raising interest rates by as much, or as aggressively as the market thinks. On the other hand, a greater than forecasted print may revive USD’s bullish momentum. 

Precious Metal

Gold

XAUUSD H4 Chart

Gold has been climbing higher since the recent FOMC announcement, with a pre-NFP sentiment being on the bullish side. As gold appreciates against the dollar, we mapped out 2 possible scenarios in preparation for the upcoming NFP. 

Scenario 1:  Job numbers disappoint, gold jumped against the greenback. We would be targeting 1855 as our next resistance area. 

Scenario 2: Job numbers exceeds forecast, gold fails to gather enough bullish momentum to continue upwards. It is now ranging in between 1785 and 1770 to end the week

From a technical standpoint, a continuation to the upside is more likely as it has already briefly break through 1785 resistance, although it has not been solidified yet. 

Energies

Crude Oil

USOIL H4 Chart

Following OPEC+ Meeting on Wednesday was a small boost in oil production by 100k bpd. To quote Raad Alkadiri, Eurasia Group’s managing director for energy and climate, the increment was so little that it is effectively meaningless and will not help to cool the energy markets. The tightness in supply means price of oil should rise, but that is not the case in reality. What is happening?

The fear of reduced demand may be outweighing supply concerns, at least in the short term. From the chart, crude oil is positioned in a very well defined bearish channel which makes the possibility of a further down move highly likely. In view of this, we will be hunting for a long position when the price of crude approaches the lower boundary of the channel. 

Forex

GBPUSD

GBPUSD H4 Chart

BOE raised their interest rates by 50 bps on Thursday while stating that the inflation may climb to a level above 13% by the end of the year. This figure is way higher than what they announced in May, leading to a prediction that inflation may last longer than previously thought. A lengthy recession may divert BOE from raising rates as aggressively to limit the negative impacts, ie: recession. 

GBPUSD has been making higher lows and higher highs, signalling bullish strength but the table may turn soon due to inflationary fears. If it does continue higher, we are looking to see 1.24000 resistance being tested. If not, then this is just a temporary recovery for the pair and it may resume its longer-term bearish trend.

US Stocks Market

SP500

SP500 H4 Chart

SP500 was edging higher steadily over the past 2 weeks but is now stalling just above 4150 resistance. The fall in volume could be attributed to the upcoming NFP where most investors are sitting on their hands. The index may continue its recovery and trade higher with 4300 in sight amidst earning season.

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