The NFP Report Will Define the Gold Trend
After the sharp rise on Wednesday, the gold (XAU) price declined by 0.03% on Thursday and consolidated within the $2,350–$2,360 range.
Traders are eagerly awaiting the release of the U.S. Nonfarm Payroll report today at 12:30 p.m. UTC, which will be a key factor in the Federal Reserve (Fed) decision regarding potential interest rate cuts. U.S. economic data over the past couple of weeks have significantly increased hopes for a rate reduction as early as September, and many investors expect today's report to support this outlook. Based on these anticipations, XAU/USD started to move upwards confidently. Gold has been rising throughout the week, benefiting from weak U.S. macroeconomic data. If today's employment data confirms a slowdown in the U.S. economy, expectations for a rate cut in September could exceed 80%, potentially pushing the price of gold towards $2,400. Currently, traders are pricing in about a 73% chance of a rate cut in September, according to the CME FedWatch Tool.
XAU/USD is consolidating and seems ready to rise. The pair may break above $2,400 and possibly rise towards $2,450. However, according to the minutes of the last Fed meeting, officials decided to avoid premature conclusions and seek more data. Additional bullish impetus for gold could come from geopolitical risks, particularly the situation in the Middle East. The conflict between Israel and Hamas has somewhat cooled but is yet to be resolved.
As reported by Reuters: "Israeli Prime Minister Benjamin Netanyahu told U.S. President Joe Biden on Thursday he has decided to send a delegation to resume stalled negotiations on a hostage release deal with Hamas, their administrations said".
Today, traders should prepare for increased volatility. The NFP report will come out at 12:30 p.m. UTC and define the XAU/USD trend movement. If the employment data reveals a softening labor market, the pair could rise towards $2,380–$2,390. Otherwise, the price may drop towards the support level of $2,350.
The Euro Continues Rising While Traders Await the NFP Data
The euro (EUR) gained 0.22% during a relatively quiet trading session on Thursday, continuing the bullish impulse triggered by disappointing U.S. data on Wednesday.
EUR/USD has been rising since 26 June as some uncertainty surrounding the French elections has dissipated, while the critical U.S. data generally were weaker than expected, weakening the US dollar (USD). Moreover, the latest eurozone core inflation figures came out higher than expected. The inflation pace has raised doubt about whether the European Central Bank (ECB) can deliver two rate cuts this year, as the market hoped it would. Interest rate swap market data now implies that the Federal Reserve (Fed) may be more dovish than the ECB for the rest of the year. Traders currently price in roughly 49 basis points (bps) worth of rate cuts by the Fed until mid-December but expect just 40 bps of cuts by the ECB. This divergence in monetary policy expectations may continue to exert bullish pressure on EUR/USD in the short term.
EUR/USD was essentially unchanged during the Asian and early European trading sessions. Today, all eyes will be on the U.S. Nonfarm Payroll (NFP) report due at 12:30 p.m. UTC. The previous NFP data indicated that the U.S. economy added 272,000 jobs in May, significantly exceeding expectations of 185,000, one of the largest monthly gains in the last five months. This time, the market anticipates an additional 190,000 jobs created in June, which is relatively easy to exceed. If the upcoming data surpasses market expectations, it will support the US dollar and reduce the likelihood of the U.S. interest rate reduction in September. Thus, EUR/USD will correct downwards, possibly below 1.07900. Weak NFP data may put strong bearish pressure on the greenback and pull EUR/USD upwards, above 1.08500.
ETF Liquidations Trigger a Sell-Off in Bitcoin
Bitcoin's (BTC) price plunged by 2% on Thursday and continued to decline during Friday's early trading session as the drop below $60,000 triggered a wave of ETF liquidations.
Until June, BTC/USD was in a clear uptrend supported by dovish monetary policy expectations across major central banks, strong ETF inflows, and a general trend towards diversification among global investors. However, after the pair failed to consolidate above the $70,000 level several times, some investors decided to exit the market temporarily. Over the past four weeks, BTC/USD has lost some 14% in value, mostly due to crypto-specific factors such as investors cashing out their profits and miners selling more coins. Lately, some important fundamental factors also started to affect cryptocurrencies. According to Lookonchain, a blockchain investigator, Germany’s government transferred some of its BTC holdings to crypto exchanges Bitstamp and Kraken, suggesting that the country may be preparing to sell its coins.
As the bearish pressure continued to intensify, BTC approached the critically important $60,000 level and eventually dropped below it, triggering an additional wave of selling.
"We estimate that the average bitcoin ETF entry price is $60,000 to $61,000, and retesting this level could result in a wave of liquidations", said Markus Thielen, founder of 10x Research.
Indeed, the BTC price dropped by more than 7% earlier today in just a few hours. Still, despite the recent sell-off, overall economic conditions and the prevailing buy-the-dip investment strategy could lead towards a swift rebound in Bitcoin's price.