Non-farm set to dominate metals trading

October 7, 2016

It's non-farm payroll day for the global economy, and the markets are just starting to get warmed up ahead of the reading tonight, the market consensus so far is for around 174K and this will be a strong reading going on from last month and for unemployment to stay flat at 4.9%. The power of a stronger non-farm payroll reading could send markets reeling lower, especially if it's above the  current rate as pressure builds for a December rate hike from the FED, which would set the tone for next year and restoring accommodative monetary policy. Pairs to watch would be GBPUSD, AUDUSD and NZDUSD which would all be very volatile during this period. But the main focus I feel will be on the commodities in general as gold and silver are expected to move rapidly, as markets have been punishing bears over the last few days.

Silver in particular has seen sharp falls losing 2 dollars an ounce in the previous day - pushing all the way down to strong support at 17.133. If we have a strong non-farm reading I would expect a strong push even lower through support at 16.708 and all the way down to 15.933. If there was a large touch on 15.933 I would expect strong profit taking from traders looking to exit. In the event of a bad reading the market will likely swing back upwards and look to find dynamic resistance on the 200 day moving average.

For gold it's looking like more of the same with a hard level of support likely to be found at 1208 as the market looks to punish gold bulls in the short term, as bets increase over a US rate hike. The market can be very trigger finger over gold though, and volatility is likely to increase in the build up to non-farm payroll as traders look to capture people to leveraged. One again the 200 day moving average is likely to be the key level of resistance in the event that gold does indeed break upwards on the charts.

The New Zealand dollar is likely to be heavily affected by the USD movements over the next 24 hours and after the recent disappointing global dairy trade auction traders will be bearish on the NZDUSD. Pushing down the charts in the wake of the recent economic events it has so far struggled to find any upward momentum as resistance was found on the 100 day moving average. From here the next level down for support is likely to be at 0.7113 and in the long run it may in fact be a case of further lows and even a push on the psychological level of 70 cents.

Whatever way you look at the next 24 hours, volatility will be heavy as traders bet heavily on the result and the FED looking to utilise the result as a platform to lift rates in the near future. 

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