The U.S. Dollar strengthened on Friday in response to an escalation in trade tensions and ahead of non-farm payrolls (NFP) and wage data. President Donald Trump issued a statement that he was considering $100 billion in extra tariffs, with China quickly responding that it “will take them on until the end at any cost”. However, all eyes will be on the NFP report later today. The expectation is for 188k new jobs to have been created in March, down from the 313k in February. The wage growth number will get the most attention as it is a leading indicator of domestic price pressure and is important to the Federal Reserve inflation forecast and interest rates. If the NFP report surprises positively, which is possible given the strong ADP report, it could cause more Dollar strength.
Gold is denominated in U.S. dollars so it is likely to react to the NFP report later today. Higher interest rates usually result in a strong dollar and can reduce the appeal of non-yielding precious metals. On the daily chart, Gold is trading above 1321 and a break of this area will open the way for a test of major support at 1305. A decisive break of 1305 is needed to open the way to the 61.8% Fibonacci retracement at 1285. On the flip side, a bullish reversal above 1330 will find resistance at the highs near 1360.
On the daily chart, USDJPY is trading above 107.0 ahead of the NFP report. The recent uptick in USDJPY due to USD strength is being capped due to the Japanese Yen’s safe-haven appeal. Continued upside momentum will find resistance at the 38.2% retracement and horizontal resistance level of 107.90 before attempting a test of the trend line at 108.60. A reversal below the support at 106.90 could open the way to further declines to support at 105.80 and 105.25.