Historically, the Non-Farm Employment Change (NFP) report creates extreme volatility in the markets and typically the most volatile is Gold. The table below shows the last six NFP releases, comparing forecast to actual and the historical high and low for the day, as well as whether the candlestick was bullish (close greater than the open) or bearish (close less than the open). Additionally, by subtracting the low from the high, the total movement for the day is calculated.
Notice that in June, September, and October the actual NFP numbers were lower than forecast and the candlestick formations were all bullish. In July and August, the NFP actual numbers were greater than forecast and the candlesticks formations were bearish. The surprise was in November when the actual NFP numbers were lower than the forecast (previous this type of release created bullish candlesticks). The December forecast is 200K. If the actual numbers are greater than the forecast, can traders expect another bearish candlestick reminiscent of July and August patterns? Or if the numbers are lower than the forecast, will the November candlestick repeat or can we expect a bullish candlestick?
Currently, the Gold daily chart shows that price has been in a congestion range since October 2017. The high of the range is around 1300 and the low of the range is around 1267. Will the NFP cause Gold to break out of this range?
As shown in the chart above, the Stochastics is approaching oversold levels, which historically, has pushed Gold upwards toward the high of the range after forming a bullish bar at the low of the range. Currently, today's candlestick is bullish (which could change at the US open) indicating that price will likely move up. If the pattern continues then, more likely than not, Gold will begin to move up toward the upper limit of the range. If by Friday morning, the price is at the upper limit of the range and the Stochastics is not over-extended, then we may see Gold break through this area in the coming days.
Of course, there is also a possibility that when the US session opens today, Gold will break the support level at 1267 and the next area of support will be the 1229 area.