Gold technical analysis – waiting for the US data to give us a direction

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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.

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.

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This article was written by Giuseppe Dellamotta at

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