Gold, DAX: Forecast Two Trades to Watch

Fiona Cincotta
By :  ,  Senior Market Analyst

Gold looks to US non-farm payroll data

  • 170k NFPs expected to be added vs 187k in July
  • JOLTS & ADP payrolls point to signs of weakness appearing
  • Gold tests falling trendline resistance

Gold is holding steady on Friday around 1940 ahead of the keenly awaited US non-farm payroll event.

The precious metal has rallied 1.4% so far this week, its second straight week of gains. However, its next move could be determined by today’s non-farm payroll data.

Expectations are for payrolls to rise by 170k in August, down from 187k in July. This would mark the weakest jobs growth in 2 years and could be the clear sign that the Fed is looking for that the jobs market is cooling and that inflationary pressures easing.

Average weekly wages are expected to rise 0.3% on a monthly basis, holding steady at 4.4% annually, which is still too high for inflation to return to 2%.

Data this week from the JOLTS job opening and ADP payrolls have pointed to a weakening labour market and a potentially disappointing print today.

A weak payroll report could see investors reprice Fed rate hike expectations. However, it is worth noting that the market is almost convinced that the Fed won’t hike rates in September. Given that there is another NFP report in October ahead of the November meeting, the impact of today’s NFP could be limited.

Gold forecast – technical analysis

Gold rebounded higher from 1884, the August low, rising above the 200 & 50 smas, before running into resistance at 1950, the falling trendline resistance.

Bulls need a meaningful rise above 1950 to extend the bullish recovery towards 1987, the July high and 2000 the psychological level.

On the downside, support can be seen at the 50 sma 1930, with a break below here exposing the 200 sma at 1914. Below here 1884, the August low comes back into play.

gold forecast chart

DAX struggles ahead of manufacturing PMIs & US NFP

  • German manufacturing PMI forecast at 39.1 up from 38.8
  • Chinese manufacturing PMI rose to 51
  • DAX tests resistance at 16000

The DAX is pointing to a lower open in cautious trade, ahead of  German manufacturing PMIs, US NFP data and despite stronger-than-expected Chinese factory activity data.

While the DAX is on track to rise 2% this week, investors will be glad to put August behind them after a difficult month for stocks, which saw the DAX drop 3%. So far September, which is typically a challenging month for stocks has kicked off on the wrong foot.

China’s Caixin manufacturing PMI rose back above 50, the level which separates expansion from contraction. The data brings some much-needed optimism after a series of weaker data in recent months has raised concerns over the health of the world’s second-largest economy and a key trading partner for Europe. While this is good news, it takes more than one data point for a change in trend. Economic conditions remain very challenging in China.

Looking ahead, German and eurozone manufacturing PMI data is due to be released and is expected to confirm the preliminary reading – in other words, a deep contraction.

In July, manufacturing activity contracted at the fastest pace since the start of the pandemic. A small improvement is expected in August.

The data comes as concerns over stagflation are growing following data this week that showed inflation in Germany remained high at 6.2%. Meanwhile, eurozone inflation was unchanged at 5.3%.

Looking ahead US non-farm payrolls could also influence the broader market mood. This week, weak data from the US has been interpreted as good news for stocks as it points to peak rates being close.

DAX Forecast – technical analysis

The DAX’s recovery from 15466, the August low has run into resistance around 16000, the round number, 50 and 100 smas.

Buyers need to make a meaningful rise above here to 16335 the May high, ahead of 16530 for fresh all-time highs.

Should sellers successfully defend 16000, the price could test support6 around 15725, before brining 15465 the August low and 200 sma into play.

dax forecast chart


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