The US NFP data is due later today. It has always been the centre of attention but today it can no longer occupy that space. I am not saying that this event is going to be meaningless, I believe the importance of this event is going to be in a different way.
A good number isn’t going to support anything and traders should not expect any cautious stance from the Fed on the back of this. The new tax levies introduced by Donald Trump on China have made the Fed’s monetary policy path a one way street.
In simple term, if the data is weak, it is easy for the Fed to sell their dovish stance, but now under these new circumstances, the Fed cannot say that do not expect “a new trend” of interest rate cuts. New tariffs on China mean escalation of war and this is likely to result in much lower growth and the Fed would be forced to use their weapon of interest rate cut.
Hence, no matter how strong the US NFP reading is today, I do not expect it to be above 200K mark anyway, traders should start pricing in lower dollar.
The below chart shows that the dollar index has already been the victim of the Trump tariffs or shall we say that Trump has used his weapon to mould the Fed’s policy his way. The short and long term support and resistance levels are shown on the chart below.
Any weakness in the dollar price is going to support gold. Therefore, expect the gold price to continue to move higher in the coming week.
