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Markets had been expecting an improvement in the US non-farm payroll figures and unemployment rate, and the fact that the latter has fallen to 7% will give further fuel to those hoping to see the Federal Reserve start to reduce its debt purchasing scheme before the end of the year. Like the UK, the Fed has advised markets that unemployment levels are one of the key pieces of data that will be used to judge the economy’s ability to handle a reduction in the stimulus process. Today’s figures certainly go a step further to enabling the voting members of the Federal Open Market Committee to do that.
At the time of economic data releases, volatility increases as instant judgments are made, and not always accurately. Today was no exception, but almost an hour after the release of the figures gold has settled down and is now trading around the $1233 level, having fallen to $1214 almost instantly and within 30 mins trading as high as $1244.
In the short-term a break below $1200 could signal further weakness, but holding above it might instigate a fresh test of the well-entrenched downward trend.