January NFP data highlights and Gold analysis

The following is January NFP data highlights and Gold technical analysis. Will the better than expected US Non-Farm Employment Change help the Fed increase rates?

3 February, AtoZForex  Non-farm Payrolls (NFP) show us the change in the number of people employed during the previous month, excluding the farming sector. The job creation is the foremost indicator of consumer spending and economic growth.

January NFP data highlights

For the month of January, the total Nonfarm Payroll employment unexpectedly increased by 227,000. However, this for the USD came at a cost. The unemployment rate nudged higher to 4.8 percent and Average Hourly Earnings m/m increased by just 0.1 percent, the US Bureau of Labor Statistics reported today. Largest job gains occurred in retail trade, construction, and financial sectors.

Overall, therefore, the data supports US economic growth (at least from the first glance). The far better then expect NFP release came as a surprise for the market as well as the Fed, I think. In the latest FOMC meeting the Committee said that it still expects some improvement in the labour market.

The stance of monetary policy remains accommodative, thereby supporting some further strengthening in labor market conditions and a return to 2% inflation.

This also implies that we should not be surprised with lower NFP and employment numbers in upcoming months.

They say the devil is in the detail and looking closer at January NFP data – we find one. As the US Bureau of Labor Statistics reported:

The change in total nonfarm payroll employment for November was revised down from +204,000 to +164,000. Also, the change for December was revised up from +156,000 to +157,000. With these revisions, employment gains in November and December combined were 39,000 lower than previously reported. Monthly revisions result from additional reports received from businesses since the last published estimates and from the recalculation of seasonal factors. The annual benchmark process also contributed to the November and December revisions.

Even though the relatively large revision is negative for the USD in the immediate aftermath, over the past 3 months, job gains have average at a healthy pace of 183,000 per month. The Dollar remains to represent one of the “healthiest” developed economy, but it will likely be a matter of time until President Trump’s administration will switch USD bulls to bears.

Gold technical analysis

Following the NFP and US employment data releases, Gold has rebounded from 100 hour moving average and reached 1216.80 level.

January NFP data highlights and Gold analysis Gold technical analysis after January NFP data (click to zoom in)

The surge higher, however, comes after a rebound from the higher boundary of our expected consolidation channel at 1220. As I wrote on Wednesday following February FOMC meeting statement, I did not expect Gold to break out of the current channel and use the boundary levels as intraday opportunities.

Therefore, the outlook for gold remains unchanged. 1220 and 1180 levels remain the key in determining further Gold’s direction. Although weekly timeframe suggests that there is further bearish scope and the double top, which has formed last week, is a confirmation of it. From the daily timeframe it seems that Gold has aimed back to test the Fibonacci 76.4% level at 1216 once again and a break above the recent high would imply that a further move towards a custom Fibonacci 88% has begun.

What is your view on January NFP data? Let us know in the comments section below.

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