April 6, 2023

NFP Likely To Contract, Gold Target to $2,063

Frank Cabibi

Tomorrow is a big day for all markets. We’ve had a handful of painful economic numbers point towards a suffering US economy. As of now, investors are getting ready for a rocky rest of the year. But one thing could set off another market correction: tomorrow’s NFP.

EdgeFinder Analysis

EURNZD is the EdgeFinder's strongest buy. At +6, the Euro wins in every category except unemployment and interest rates. The crowd is heavily short this pair, but institutions are acting otherwise. Despite lower interest rates, EUR has a better handle on inflation which is arguably the leading metric in measuring a currency's strength.

This pair has historically performed positively in the month of April for the last 10 years on average. The trend reading suggests higher moves into the 1.75s in the mid term. Longer term target for this pair is around 1.76225.

NZDCAD showing some weakness on the 1D timeframe as price falls over 0.80% on the day. Kiwi is looking more bearish as economic data shows little signs of improvement. On the other hand, CAD is growing in jobs and lowering the UE rate. Canada is also hiking interest, and it looks like they are more on track to a recovering economy, stronger currency, and lower inflation as of now.

Price hit the top of a falling trend line and rejected the highs. Today's candle is a straight decline towards the 0.83993 level. This looks like the pair may try to complete the move to the bottom of the channel.

Gold looks stronger by the day on a fundamental level. Predominately, the metal prevails under recessionary worries, stock market fears, lower treasury yields and poor economic data. All of which are happening right now. Tomorrow's NFP news is already expected (236K) to be lower than the previous report (311K), which suggests signs of contraction.

Because of lower forecasts this time around, NFP could still beat the expectation. However, a number closer to the forecast than the previous is not a good sign for the economy. Gold is heavily bought by institutions, retail is heavily bearish, seasonality points to more gains, trend readings are higher, targets are $2,063 and $2,125.

Retail Spotlight

With focus on the minor pairs, the crowd is heavy bullish NZD and AUD. They are also heavily short EUR and stock indices. They can't quite decide what they want to do with the technology sector and oil.

Smart Money Spotlight

The Yen is still heavily short along with CAD, US30 and CHF. The most longed assets are suggesting risk off sentiment as gold is the heaviest long by institutions. Gold also saw the heaviest net change in institutional interest to the long side meaning that there is increased interest in the metal.

Fundamental Spotlight

When comparing USD and CAD unemployment rates, the US has a better handle on maintaining stability in the jobs market. However, tomorrow's news could leave a big impact on the dollar in a positive way. If unemployment rises, it may spark fear in the US stock market in the short term. In turn, the USD will likely see upside due to risk off sentiment. Gold will likely do the same.

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