Non Farm Payrolls Day: SPOT GOLD Price projection & analysis: XAUUSD: $1888/1866 or $1966/1988 in next 10 days?

Key Fundamentals & EVENTS IMPACTING SPOT GOLD in July 2023:

1. FOMC: Federal Open Market Committee unanimously holds benchmark rate in target range of 5%- 5.25%, as expected, in first pause since starting cycle of increases in early 2022, to “assess additional information and its implications for monetary policy”. New projections show policymakers favor a half-point of additional increases this year, which would push borrowing costs to about 5.6% — higher than most economists and investors have been expecting. FOMC statement gives clear signal that policymakers will resume tightening by referring to the “extent of additional policy firming that may be appropriate”; prior statement, in May, gave more leeway on whether to hike. Forecasts for economic growth and core inflation rose for 2023, while unemployment projections fell.

Nearly all FOMC participants expect that it will be appropriate to raise interest rates somewhat further by the end of the year. With another hike in interest rates anticipated by the Federal Reserve and the European Central Bank for July, and some peers on a similar track, an aggregate gauge of borrowing costs calculated by Bloomberg Economics now shows a peak of 6.25% during the current quarter. That’s up from 6% foreseen three months ago.

Whatever the case, policymakers still minded to keep rate hiking, such as those at the Fed, are entering a more hesitant phase as they increasingly watch for an impact on economic growth. Federal Reserve officials look on track to keep raising rates despite a recent pause after 10 straight hikes as they try to slow a resilient US economy and hot labor market to cool inflation. Policymakers forecast rates reaching 5.6% this year, implying two more 25 basis-point increases from the current range of 5% to 5.25%. Policymakers have stressed there’s a lot of uncertainty about the rate outlook as they evaluate how recent banking failures are affecting credit conditions, putting extra weight on incoming data.

In conjunction with the Federal Open Market Committee (FOMC) meeting held on June 13–14, 2023, meeting participants submitted their projections of the most likely outcomes for real gross domestic product (GDP) growth, the unemployment rate, and inflation for each year from 2023 to 2025 and over the longer run. Each participant’s projections were based on information available at the time of the meeting, together with her or his assessment of appropriate monetary policy—including a path for the federal funds rate and its longer-run value—and assumptions about other factors likely to affect economic outcomes. The longer-run projections represent each participant’s assessment of the value to which each variable would be expected to converge, over time, under appropriate monetary policy and in the absence of further shocks to the economy. “Appropriate monetary policy” is defined as the future path of policy that each participant deems most likely to foster outcomes for economic activity and inflation that best satisfy his or her individual interpretation of the statutory mandate to promote maximum employment and price stability.

Bank Stress Test Results by FED: All 23 banks tested remained above their minimum capital requirements during the hypothetical recession, despite total projected losses of $541 billion. Under stress, the aggregate common equity risk-based capital ratio—which provides a cushion against losses—is projected to decline by 2.3 percentage points to a minimum of 10.1 percent.

For the first time, the Board conducted an exploratory market shock on the trading books of the largest banks, testing them against greater inflationary pressures and rising interest rates. This exploratory market shock will not contribute to banks’ capital requirements but was used to further understand the risks with their trading activities and to assess the potential for testing banks against multiple scenarios in the future. The results showed that the largest banks’ trading books were resilient to the rising rate environment tested.

2. Job Data: US ADP Employment Change marked the largest one-month increase since February 2022, to 497K for June versus 228K expected and 267K prior (revised). That said, the ISM Services PMI also improved to 53.9 for the said month from 50.3 in May, versus the market expectation of 51.0. Further, the Challenges Job Cuts also slumps to 40.709K from 80.089K previous readings. However, the JOLTS Job Openings drops to 9.8M from 10.103M, compared to analysts’ estimation of 9.93M. It should be noted that the Initial Jobless Claims also rises to 248K for the week ended on June 30, versus 245K expected and 236K previous readings (revised).
3. YEN: The BOJ on 16.06.2023 maintained its -0.1% short-term rate target and a 0% cap on the 10-year bond yield set under its yield curve control (YCC) policy, pushing the yen broadly lower. On 19.06.2023, the yen touched a near seven-month low of 141.98 per dollar, having slid 1% on Friday. The yen also touched a fresh 15-year low against the euro of 155.32. While inflation remains above the BOJ’s 2% target, public pressure has declined as fuel and global commodity prices have fallen from last year’s peaks. – Japanese authorities are facing renewed pressure to combat a continued yen fall driven by market expectations that the Bank of Japan will keep interest rates ultra-low, even as other central banks tighten monetary policy to curb inflation. Aside from verbal intervention, Japan’s government has several options to stem what it considers excessive yen falls. Among them is to intervene directly in the currency market, buying large amounts of yen, usually selling dollars for the Japanese currency.If the pace of yen declines accelerates and draws the ire of media and public, the chance of intervention would rise again. The decision would not be easy. Intervention is costly and could easily fail, given that even a large burst of yen buying would pale next to the $7.5 trillion that change hands daily in the foreign exchange market.

4. China: China cut its key lending benchmarks on 20.06.2023, the first such reductions in 10 months as authorities seek to shore up a slowing economic recovery, although concerns about the property market meant the easing was not as large as expected. The Chinese central bank cut the one-year loan prime rate by 10 basis points from 3.65% to 3.55%, and trimmed the five-year loan prime rate by 10 basis points from 4.3% to 4.2% — for the first time since August.

The latest monetary loosening comes as a post-pandemic recovery in the world’s second-largest economy shows signs of losing the initial momentum seen in the first quarter. China’s cabinet announced a package of 33 measures covering fiscal, financial, investment and industrial policies on Tuesday to revive its pandemic-ravaged economy, adding it will inspect how provincial governments implement them.

The stimulus package, which was flagged by China’s State Council in a routine meeting last week, underscores Beijing’s shift toward growth, after COVID-19 control measures pounded the economy and threaten Beijing’s 5.5% growth target for the year. To revive investment and consumption, the government ordered localities not to expand curbs on auto purchases and said those which already have curbs in place should gradually increase their quotas on car ownership.

In terms of monetary and financial policies, China will boost financing efficiency via capital markets, by supporting domestic firms to list in Hong Kong, and promote offshore listings by qualified platform companies. The State Council also vowed to further reduce real borrowing costs, and strengthen financial support for infrastructure and major projects.

In an apparent answer to the calls, the Shanghai and Shenzhen stock exchanges published rules on Tuesday to allow listed real estate investment trusts (REITs) to raise fresh money to fund acquisition of infrastructure projects.

5. EURO: The European Central Bank raised euro zone borrowing costs to their highest level in 22 years on Thursday and said stubbornly high inflation all but guaranteed another move next month and likely beyond that too. The quarter-percentage-point move was the ECB’s eighth consecutive interest rate hike since it badly misjudged the tenaciousness of price rises early last year, and took its policy rate to 3.5%, a level not seen since 2001. Euro zone government bond yields and the euro rose as traders priced in a near-certain hike next month and higher rates generally. While signs that economic growth is slowing would normally augur a pause, the ECB has been taking its own projections with a pinch of salt after years in which they missed the mark. Despite an unprecedented 400 basis points of rate hikes in the space of a year, the clear message from the ECB is that it isn’t done yet. Another increase in July has essentially been pre-announced and voices calling for a pause after that are being drowned out by hawks keen on further tightening in the fall.
6. Gold ETF: Global physically-backed gold ETFs experienced net outflows in June, calling a halt to their three-month inflow streak. Collective holdings of global gold ETFs fell by 56t to 3,422 t while total assets under management (AUM) reached US$211bn (-4% m/m). The early June strong equity market performance in key markets likely shifted focus away from risk-off assets such as gold. And the majority of outflows occurred when the gold price dropped during the second half of the month amid hawkishness from major central banks in the face of obstinate inflationary pressure.

The US Dollar Index (DXY) continued crashing till 22 June 2023 from 104.300 zone towards 101.600 zone (22 June low), CMP 102.700 rising since last 6 days from 101.500 towards 103.000 zone. This impacted XAUUSD less and a crash in Gold price was observed from $1966-$1892 RT $1935 high 05.07.2023 in the month of June 2023.

How to trade Spot Gold XAUUSD on NFP data today?

XAUUSD Bearish Scenario: $1907/1888/1866/1836/1818?

If the bearish momentum extends, gold price may fall further towards $1907/1888/1866/1818 price trap zone with 1818/1777 as next stops, if Gold crash halts at 1866 or 1836/1818 zones a reversal can be expected with a RT V 23.6 M15 M30 RT before/in next 9 trading days.

XAUUSD Bullish Scenario: $1947/1966/1985/2020/2048?

If the Bullish momentum pushes Gold price across $1970 barrier, $1985. $2020 followed by $2048 & $2069 zone can be the next target for Gold, opening way to $2096 zone as an ideal sell entry.

Heading into the NFP show today, Spot Gold price is under a price trap of $1907-1926 zone, as investors/traders are observing market closely.

BUY/SELL STOPS | B/S LIMITS: TARGET RT 23.6 TF M15/30/H1 or NAP $5 each set:   

S2 ZONE 1888 | DOWN TREND (Below $1870)  : 1866/1836/1818/1777 | BUY LIMITS
R2 ZONE 1931| UP TREND (Above $1950)        :  1966/1985/2020/2069| SELL LIMITS

Technical Analysis | XAUUSD CMP $1915 | Gold Price – SR (D1) (MN) Levels to watch:

SR ZONES D1
R1	1915
R2	1930
R3	1946
R4	1955
R5	1971
S1	1906
S2	1890
S3	1875
S4	1865
S5	1850

SR ZONES MN
R1	1930
R2	1965
R3	1999
R4	2021
R5	2055
S1	1909
S2	1874
S3	1840
S4	1818
S5	1784

07.07.2023 | XAUUSD: Spot Gold Price Projection and Trading Scenario by Piyush Ratnu

 

PROJECTED TRADING SCENARIO:

• Observe price at US OPENING D1 SS1 and then US SS2
• Observe SR: S3($1875)-3/6/9 & D1.SR R3 ($1946)+3/6/9 for M5/15.236RT
• Do not enter between the pivot zone D1: S/R zones
• ObserveD1SR: FIB 23.6% on M5 and M5/M15 TF for NAP target price based exit in buy or sell entry after 30/60/90/120 minutes of NFP and $15/30 price movement sets
• Movement of $50/75 dollars on Gold price is not something unexpected nowadays, and a surprise on Monday during early trading hours cannot be ruled out too, so closing all positions today in net average profit is always the best trading strategy for every trader who wants to safeguard his principal.

I expect V pattern on M15, M30, H1 and H4 TF chart in sequence in next 6 days (short term target) and 18 trading days (long term target). XAUUSD CMP $1915. I will prefer to BUY lows near SR zone mentioned in the above analysis.

Point to be noted: let us not forget ongoing geo-political tensions which can trigger an upward price rally of more than $150/200 in Spot Gold price. Another catalyst of low volumes might step in too during Monday early morning opening.

Terms: TF: Time Frame | RT: Retracement | SR: Support Resistance | NAP: Net Average Profit

It is always wise to first PLAN THE TRADE, and then TRADE THE PLAN!

Hence, it is suggested to first observe the crash or rise with specific zones and levels in mind on the basis of various fundamental and technical parameters mentioned above, before entering a trade in a specific direction with a target of net average profit in a specific set of trades.

 

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