Gold is consolidating right around a key trendline as the market awaits the US NFP and ISM Services PMI reports. We got a spike on Wednesday as the Fed was pretty dovish compared to the hawkish expectations leading into the event. Since it didn’t change anything on the macro side though, the market faded the reaction as the data continues to be what really matters.
Gold Technical Analysis – Daily Timeframe
On the daily chart, we can see that gold recently fell below a key trendline that was defining the bullish momentum that started from the lows around the 2000 level. From a risk management perspective, the buyers will have a much better risk to reward setup around the 2150 level where there’s also another major trendline for confluence. That looks like a stretch at the moment, but if the US data continues to run strong, we should see a major correction.
Gold Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that the price recently broke the bearish flag to the downside increasing the bearish momentum as the sellers piled in more aggressively. Technically, the measured target stands around the 2220 level. We can notice that the sellers continue to lean on the downward trendline as that’s a good level to structure short positions with a defined risk just above it. A break above the trendline should see the buyers stepping in with more conviction and lead to a rally into the 2352 high. That level will likely be the last line of defence for the sellers as a break to the upside should technically invalidate the bearish trend.
Upcoming Catalysts
Today we have the US NFP and the ISM Services PMI on the agenda. For the NFP, the main focus should be on the Average Hourly Earnings as strong figures will likely trigger a hawkish reaction from the market and send gold prices lower. In case we see very weak employment numbers with the unemployment rate jumping to something like 4.0%, then the market might ignore the stronger wage growth figures and lead to a rally in gold.
For the ISM Services PMI, the main focus should be on the prices and employment components. We got a strong dovish reaction last time when the prices index dropped to the lowest level in 4 years. If we get another drop or at least not a big change from the current levels, then the market might take that as good news for inflation and even if the headline number beats, it could lead to falling Treasury yields and rising gold prices in the short term.
