Gold, USDInd, US500 index :: InvestMacro

By ForexTime 

• Friday’s NFP report: mixed data sparked initial market confusion
• Jobless rate edged lower, but hiring also slowed in August
• Odds for 50-bps Sept Fed rate cut now down to 26% from 40%
• Now, US500 and US dollar indexes up; gold still lower, as predicted
• All highlighted post-NFP target prices reached!

 

The US500, USDInd, and Gold have fulfilled our forecasts from Friday!

During this past US nonfarm payrolls (NFP) release, which typically happens on the first Friday of every month, we held a webinar titled:

“Profit from Payrolls? How to Trade the NFP”

During this exclusive webinar on September 6th, we shared an overview of:

• What is the NFP?
• What is the NFP so important?
• Potential trading strategies

 

Perhaps more importantly for traders, during the webinar …

We also shared some price targets for the US500 index (which tracks the S&P 500), the USDInd (US Dollar index), and XAUUSD (gold).

 

What were the target prices?

These price targets were oversimplified as an easy-to-track measure, solely looking at the incoming US unemployment rate:

 

• If the August unemployment rate came in at 4.3%, matching July’s number which was also the highest jobless rate since 2021:

  – US500 index to fall to its 100-day SMA

  – USDInd to fall to around 100.5

  – XAUUSD to soar to $2530 (or higher to new record high)

NOTE: Lines in bold above = target prices reached. See more below.

 

What were the August NFP numbers?

At 12:30PM GMT on Friday, September 6th, during our live webinar, investors and traders worldwide received these official numbers:

• US unemployment rate: fell to 4.2% in August from 4.3% in July 2024.
• August headline NFP number: 142,000 new jobs added; lower than the forecasted 165,000.
• July’s headline NFP number: revised lower to 89,000 compared to the 114,000 previously reported on August 2nd, 2024.

 

How did markets react at first?

As a knee-jerk reaction immediately after the NFP data was released:

• USDInd fell to within 10 pips (100.595) of our 100.5 downside target
• US500 climbed by as much as 54 index points to print at 5528.9
• Gold jumped up to as high as $2529.10, flirting with our $2530 (or higher) upside target

 

The above price action came as Fed funds futures markets also saw wild swings, before paring those bets for a jumbo-sized 50-basis point Fed rate cut on September 18th:

• Before Sept 6th NFP release: 40% chance
• Soon after NFP release: 50% chance
• At time of writing on Monday, September 9th: 26% chance

 

All highlighted price levels have been reached!

Once markets had more time to digest the data, they reached our forecasted prices:

1) USDInd reversed losses and has now reached its 21-day SMA target, as forecasted!

2) US500 index fell all the way down to its 100-day SMA.

This US stock index duly found support at that widely-followed technical indicator (100-day SMA) before bouncing higher today (Monday, September 9th).

To be clear, the US500 went in the “other” direction. We had initially anticipated the US500 to rise if shown the lower 4.2% unemployment rate.

Instead, stock markets preferred to focus on the hiring slowdown (lower-than-expected headline August NFP number, and the downward revision to the headline July NFP number), instead of the lower unemployment rate. Refer to numbers stated earlier in this article.

However, the fact that the US500’s declines last Friday was halted almost perfectly at its 100-day SMA proved true our expectations that this technical indicator would act as a critical support level.

 

 

3) Gold erased its initial spike higher to fall down to its 21-day SMA, as expected.

 

 

After all, the latest US jobs report wasn’t all that bad.

The jobless rate ticked back down in August, while the creation of new jobs was still evident in the world’s largest economy.

This past Friday’s data release offered little that screams an imminent recession, nor the jarring need for a jumbo-sized 50-bps rate cut by the Fed this month.

 

Hence, once markets could hang on to a more sensible narrative:

• Odds for a 50-bps Fed rate cut has been duly lowered to 26%
• The US dollar index (USDInd) has recovered higher to its 21-day SMA
• Spot gold (XAUUSD) is kept lower around its 21-day SMA
• The S&P 500 (US500) is now staging a modest rebound off its 100-day SMA support

… all as we had forecasted prior to the September 6th release of the US nonfarm payrolls report.

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Article by ForexTime

ForexTime Ltd (FXTM) is an award winning international online forex broker regulated by CySEC 185/12 www.forextime.com