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Preview of US ISM Non-Manufacturing PMI: Trading the XAUUSD

Gold prices
Gold prices

At 3pm GMT, the US ISM Non-Manufacturing PMI report for December 2019 will be released. This report is coming at a time when the markets are seeing heightened activity from geopolitical factors. It has also assumed increased relevance after the manufacturing version of indices measured by the Institute of Supply Managers dropped last week to its lowest levels since 2009.

The market analysts are predicting an increase in the figure to 54.5, which is supposed to provide a marginal increase from the previous figure of 53.9.

The trade balance data and factory orders are also scheduled for release, with market analysts predicting that a reduction in the deficit is on the cards. A drop in the factory orders has also been predicted, as a result of the drop in aircraft parts sales which stem from the cancellation of further production of the Boeing 737 MAX.

How can you trade this report?

Read our Best Trading Ideas for 2020.

Trading the US ISM Non-Manufacturing PMI with Gold Prices (XAUUSD)

The announcement yesterday that the Chinese trade delegation was travelling to New York to sign the Phase 1 deal on January 13 was a boost to the US markets and the US Dollar, allowing these assets to stave off intraday losses that had accrued from the US-Iran tensions in the Middle East. However, not much of this impact was seen on gold, which stormed to multi-year highs above 1560. However, gold price has hit resistance at 1568.97 (previous 2011 high and 2012 lows). XAGUSD’s weekly chart is also showing a bullish flag, with price having burst out of the flag’s upper border in breakout fashion.

A better-than-expected reading which matches or exceeds my tradable deviation of 55.0 or higher, should be good for the USD and would prompt a retreat from present price levels in the XAUUSD.

A reading which is worse than expected (53.3 or lower) should trigger more gold buying and higher gold prices, as XAUUSD seeks to complete the measured move of the bullish flag pattern. However, the positivity gained from the trade news yesterday may dampen any upside moves, leading to just modest gains on XAUUSD.