Gold Technical Analysis | Forexlive

The most recent release of
the NFP report, which came out last Friday, once
again surpassed expectations, extending its remarkable streak of positive outcomes
to 14. However, a closer analysis of the report revealed less favourable
aspects. The unemployment rate experienced a notable rise from 3.4% to 3.7%,
marking the largest month-over-month increase since the onset of the pandemic.
Furthermore, there was a slight decrease in average workweek hours, which can
often indicate potential layoffs being considered by employers. Overall, the
report presented a mixture of information that could be subject to different
interpretations.

Shifting our focus to the US ISM Services PMI, it reported a significantly lower
figure of 50.3 compared to expectations, narrowly missing the threshold for
contractionary territory. The employment sub-index displayed contraction, while
the prices paid sub-index witnessed a substantial decrease, returning to levels
last observed in May 2020. As a result, the market responded by further
diminishing the likelihood of the Federal Reserve (Fed) implementing additional
interest rate hikes.

Additionally, recent
unexpected rate hikes by the RBA and the BoC may have influenced risk
sentiment, causing concerns that the Fed might follow suit. However, this seems
unlikely as the Fed typically aligns its actions with market expectations.
Moreover, it is important to consider that the CPI report has not yet been
released.

Yesterday, we got a big
miss in US Jobless Claims, which may be yet another sign of a
weakening labour market. The market further priced out the rate hike odds in
June as it now looks like a certain pause unless we get a hot CPI next week.

All of the above should
have contributed to a rally in gold, but what we’ve seen was just a rangebound
price action for the entire week. This should be a clear sign that the market
is waiting for the next week’s big events before deciding where to go next.

Gold Technical Analysis –
Daily Timeframe

On the daily chart, we can see that the gold’s
selloff from the 2076 high stalled right at the trendline where we
can also find confluence with the
50% Fibonacci retracement level
and a previous swing support. There’s also a weekly 21 moving average right
there that can be seen on a weekly timeframe. This support zone is key. If gold
bounces and starts to rally, we can expect another test of the 2076 high with a
possible breakout. On the other hand, if the price breaks through the
trendline, we should see new lows coming and the 1800 level being the first
line of support.

Gold Technical Analysis – 4
hour Timeframe

On the 4 hour chart, we can clearly see the
rangebound price action since the break of the downward trendline. We are now
stuck in this box, and this offers a good opportunity for both buyers and
sellers. If gold breaks the resistance
supported by a fundamental catalyst, then we should see the buyers piling in
and extending the rally towards the 2076 level. Conversely, if the price breaks
the support, the sellers should jump onboard and ride the selloff towards the
1800 level.

Gold Technical Analysis – 1
hour Timeframe

On the 1 hour chart, we can see that
recently we had a selloff after the BoC surprising hike and yesterday the rally
after the big miss in Jobless Claims. Such rangebound markets can chop out many
traders as the price action remains erratic. The best strategy is generally to
wait for a clear breakout and go with the flow. More aggressive traders may
look at the 1970 swing high level as an opportunity to go long on a breakout
after the miss in jobless claims yesterday.