Strong U.S. Nonfarm Payrolls Cool Rate Cut Expectations

The U.S. January nonfarm payrolls report delivered a notable upside surprise, with payrolls increasing by 130,000 jobs, nearly double market expectations. The unemployment rate declined from 4.4% to 4.3%, while the labor force participation rate edged higher.

Although January and February payroll data are often subject to seasonal distortions, and the White House had previously tempered investor expectations, the actual figures significantly outperformed forecasts.

(Figure 1. Unemployment Rate and Nonfarm Payrolls | Source: U.S. Bureau of Labor Statistics, BLS)

The U.S. Secretary of Labor noted that amid declining birth rates and reduced immigration, monthly job growth of around 50,000 may represent a new structural norm. Some Wall Street institutions suggest that even monthly gains of 0 to 50,000 jobs would be sufficient to maintain labor market stability, implying that further monetary easing may not be necessary at this stage. Under such circumstances, an aggressive rate cut could potentially undermine the Federal Reserves independence and credibility.

Shortly after the data release, former President Donald Trump posted on Truth Social emphasizing the importance of rate cuts. He argued that with strong payroll performance, U.S. interest rates should be significantly reduced, potentially saving the federal government up to $1 trillion in interest expenses. He added that the United States should be paying among the lowest interest rates globally, well below those of other nations.

(Figure 2. Trumps post following the payroll release | Source: truthsocial.com)

Notably, U.S. manufacturing employment recorded a net gain of 5,000 jobs in January, marking the first positive growth in several months. The increase was largely attributed to ongoing investment in data centers and semiconductor manufacturing, suggesting a gradual shift in industrial structure.

(Figure 3. Manufacturing added 5,000 jobs; education and healthcare led overall job growth | Source: MacroMicro)

Looking ahead, the Federal Reserves rate-cut path appears increasingly complex. According to the CME FedWatch Tool, the probability of a rate cut before June has dropped sharply from roughly 70%. In simple terms, persistent uncertainty surrounding monetary policy may cast a shadow over the near-term outlook for gold.

(Figure 4. Strong payroll data reduce rate-cut expectations | Source: CME FedWatch Tool)Technical Analysis

Gold is currently consolidating in a sideways range. The Bollinger Bands are widening but have yet to signal a clear directional breakout. During the U.S. session yesterday, price briefly staged a false breakout above 5091, but bullish momentum failed to sustain, and the market retreated back below that level. For now, downside bias remains the primary focus.

In the short term, price action is forming an orange box consolidation pattern. Traders should closely monitor support near the lower boundary of this range, around 4982. A decisive break below this level could further widen the Bollinger Bands and potentially confirm directional momentum.

The MACD oscillator does not currently present a clear signal.

Strategy Outlook

As noted in yesterdays analysis, 5091 serves as a key pivot level separating bullish and bearish sentiment. Ultra-short-term traders may consider initiating short positions near this resistance. A sustained break above 5091 would invalidate the bearish setup and favor a tactical long position.

Key Levels

Resistance

R1: 5091

Support

S1: 4982

S2: 4663

Risk Disclaimer

The above views, analyses, research, price levels, and other information are provided for general market commentary only and do not represent the official position of this platform. All readers assume full responsibility for their own trading decisions and associated risks. Please trade prudently.