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Summary: The U.S. non-farm payrolls increased by 187,000 in July, which was lower than the expected 200,000 and significantly below the 12-month average of 312,000.

The unemployment rate declined from 3.6% to 3.5%, beating the expected 3.6%. Since March 2022, the unemployment rate has fluctuated between 3.4% and 3.7%. The labor force participation rate remained unchanged at 62.6% for the fifth consecutive month.

Average hourly wages rose by 0.4% MoM, higher than the expected 0.3%. Over the past 12 months, average hourly wages have increased by 4.4%. The average weekly working hours saw a slight decline of -0.1 hours to 34.3 hours.

Fundamentals

The report released by the U.S. Bureau of Labor Statistics on Friday showed a moderate increase of 187,000 in non-farm employment in July, similar to the June figures. The unemployment rate dropped to 3.5%, and wages showed steady growth.

The employment growth in the US was more moderate in July, while wage growth remained robust, in line with the ongoing labor demand, which is the driving force behind the economic recovery. It is worth noting that the average workweek decreased to 34.3 hours, which is comparable to the lowest level since the spring of 2020 when the pandemic was at its peak. This is another sign of weakness in the job market, indicating that employer demand is weakening. The idea is that companies may reduce employees' work hours before resorting to layoffs.

Overall, the report remains robust in the context of employment growth, and the content of the report is positive. The employment rate remains high, close to or reaching the expected levels, and the unemployment rate is at a 50-year low. Hawkish Fed officials will keep an eye on wage growth, which is their real concern. Employment costs will be a driving factor for inflation, and achieving sustainable inflation may prove challenging. Hawkish officials will advocate for further action based on the strength of the labor market.

Everyone wants to see healthy real wage growth, but the key challenge now is that wage growth remains at previous levels despite a significant drop in inflation rates. Unless we can sustain significant productivity gains, aligning all these factors may prove difficult.

Technical Analysis

Due to robust U.S. economic data, the gold price has been forming lower lows and lower highs in the past few trading days. Both the 50-day SMA and the 20-day SMA, which came close to $1,945 last Friday, have failed to halt the decline in the gold price.

Currently, the price remains below the breached bearish channel, indicating early signals of a short-to-medium-term downtrend, and it continues to diverge downward. Meanwhile, the negative trajectories of the RSI and MACD reflect sustained weak demand.

Nevertheless, while our short- and medium-term trends remain bearish, we still anticipate a potential rebound in the gold price to seek more favorable short entry positions.

On the downside, the $1,920-$1,930 region will be closely watched, as it includes the short-term moving averages, the interim uptrend line starting from the June low, and the upper edge of that channel. The 38.2% Fibonacci retracement level is also positioned there. Therefore, a break below this level may trigger significant selling toward the $1,892-$1,900 range, which converges with the 200-day SMA. Further downside could be halted around the $1,865-$1,855 range.

Overall, in the past few trading days, as the gold price further declined, our target levels have also moved lower. Despite anticipating some upward movement, the ultimate outlook remains bearish. In terms of trading, it is recommended to go short at highs.

Trading Recommendations

Trading Direction: Short

Entry Price: 1960

Target Price: 1892

Stop Loss: 1985

Valid Until: 2023-08-18 23:55:00

Support: 1923, 1912, 1903

Resistance: 1938, 1954, 1964