The recent outperformance of the NFP data, despite concerning factors such as a higher unemployment rate and lower average weekly hours, has had a relatively minimal impact on Gold . The market may have interpreted this data as a labour market that remained resilient but slightly less tight, which could potentially lead to lower inflation without causing significant economic distress.
Moreover, the underperformance of the ISM Services PMI has not affected Gold either even if the sub-index indicating lower prices paid has generated some speculation that core inflation could decline.
The significant miss in Jobless Claims last week was taken with caution, probably due to seasonal adjustments that may have skewed the data, while the improvement reflected in Continuing Claims indicated that people were able to find jobs pretty fast after being unemployed. All of the above, should have given a boost to gold but it looks like the market is just waiting for the US CPI report tomorrow.
Gold Technical Analysis – Daily Timeframe
On the daily chart, we can see that the gold selloff stalled at the upward trendline where we can also find the 50% Fibonacci retracement level and a previous swing low level acting as support. This has been a strong zone that the sellers couldn’t break even after multiple tries. The moving averages are still crossed to the downside indicating a downtrend, and we can also notice that the sellers leant on the red 21 moving average to position for more shorts. A break above the moving average may start to give the buyers some conviction for more upside.
Gold Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can clearly see the rangebound price action that’s been going on for almost a month now. We have two key levels to watch here: the support at 1934 and the resistance at 1984. Moreover, we can see that there’s an important mid-level at 1954 where we can see multiple rejections from the market as more aggressive traders may have been leaning on it to position in anticipation of a breakout.
Gold Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that we have another minor resistance level at 1970 that is likely to lead to an extension to the 1984 level if the price breaks above it. Another failure though, would take us back to the 1954 support. Overall, it’s a waiting game for now.
This week is filled with lots of significant events. It all kicks off with the highly anticipated US CPI report scheduled for tomorrow. This report is expected to solidify expectations for the upcoming FOMC rate decision, which will take place the following day. A hot report, especially on the Core CPI should lead to more downside for gold and probably give us the breakout to the downside. If the data misses across the board though, we should see the price breaking out and rallying towards the 2076 high.
Additionally, later in the week, we have another Jobless Claims report and the release of the University of Michigan consumer sentiment survey. The previous release of this survey had a substantial impact on the market, primarily due to a significant surge in long-term inflation expectations.
