XAUUSD: Accumulation Ahead of NFP Data!

5 oct 2023

Gold price is in a slightly bearish phase, staying below $1,820 due to the impact of the yield of the 10-year US Treasury bond, which is above 4.7%. This situation makes it difficult for XAU/USD to undertake a significant recovery. Technical analysis on the daily chart indicates a bearish trend for XAU/USD, with indicators showing an abundance of sell signals in heavily oversold territory, without signs of downward exhaustion. The momentum indicator is accelerating downward, reaching around 94, while the relative strength index (RSI) is at 18. Meanwhile, moving averages confirm the bearish strength, well above the current level, highlighting the sellers' dominance.

Analyzing the 4-hour chart, the risk of further declines is evident. A simple 20-day moving average acts as dynamic resistance around $1,824.10. This indicates that XAU/USD is under the control of sellers, as confirmed by technical indicators that turned downward after a temporary correction in negative levels, reflecting the lack of interest from buyers despite the extremely oversold condition of the US dollar.

Regarding support and resistance levels, it is expected that gold may find support at $1,804.70, $1,792.10, and $1,779.85, while it may encounter resistance at $1,824.10, $1,833.35, and $1,845.20.

The spot price of gold is touching new multi-month lows, reaching $1,813 per troy ounce. Despite the extremely oversold conditions of the US dollar, the precious metal fails to attract buyers. The market is concerned about persistent inflationary pressures and a tight labor market, which could lead the Federal Reserve (Fed) to further monetary restrictions, with the consequent risk of an economic recession. Hawkish comments from Fed officials this week and mixed signals from the employment sector keep these concerns alive, awaiting the Nonfarm Payrolls report for September. It is expected that 178,000 new jobs will be added in the month, while the unemployment rate is expected to contract from 3.8% to 3.7%. Before the event, US Treasury yields have slightly stabilized after reaching historical peaks. The yield on the 10-year Treasury note is currently at 4.72%, slightly down from a 16-year high of 4.88%, while the 2-year note offers 5.02% after soaring to 5.20% in mid-September. Lower yields prevent the US dollar from rallying in the short term. Furthermore, at the 1916 level, it seems that the price is accumulating for an imminent rise or fall. At the moment, my view is still long, with the price in the buy zone. It will be crucial to assess tomorrow's NFP data, which will definitely shake a price that has been too stagnant for days. Let me know what you think. Happy trading from Nicola, CEO of Forex48 Trading Academy.