- Gold fell to break through an important support zone and make bullish commitments to weekly liquidity.
- The market is now focused on the downside as the bulls in the US dollar shift into high gear.
- Gold Price Analysis: XAU / USD Brings $ 1,857 Target After Big Crash – Confluence Detector
The price of gold was rocked Thursday as the US dollar emerged ahead of a much anticipated nonfarm wage event on Friday.
The greenback, measured against a basket of currencies in the DXY index, is trading near New York session highs at 90.51, up 0.67% after falling from a low of 89.8870 to a high of 90.5510 so far.
Gold, on the other hand, is trading near the day’s lows of $ 1,871, losing 1.92% after tumbling like a stone from a high of $ 1,909.69 to a low of 1,865, $ 36. In doing so, he broke a key area of short-term support and highlighted long-term charts and downside targets; (More details below).
Meanwhile, the spotlight is on the US economic recovery, inflation and the Federal Reserve.
Stronger-than-expected US employment data that suggests an improving labor market has reinforced signs that the world’s largest economy is indeed on track for a post-covid recovery that should spur the Fed to act sooner rather than later.
For example, Dallas Fed CEO Robert Kaplan reiterated today, “I think it would be better to gradually release the accelerator on QE rather than having to brake later.
Meanwhile, and in terms of data and a potential prelude to tomorrow’s NFP, the US private sector payroll increased by 978,000 jobs in May, ADP’s national employment report showed.
This is the biggest increase since June 2020 and well above what economists polled by Reuters had predicted of an increase of just 650,000 jobs.
At the same time, initial jobless claims in the United States fell below 400,000 last week for the first time since the COVID-19 pandemic began more than a year ago.
Such data improvements could set the tone for central bank meetings later this month.
For NFP, the consensus forecast of Wall Street economists was 650,000 new jobs in the United States last month.
Meanwhile, ISM Sevices data was also released today, and the greenback’s momentum stopped around the same time as the release, potentially due to the jobs component that has shifted. from 58.8 in April to 55.3. This is not promising until tomorrow’s NFP, given that the vast majority of jobs created in a post-pandemic world are expected to be in the service sector.
Nonetheless, the market may continue to consider that, however strong a rebound in job creation may be, the fact is that the US economy is recovering at a faster rate than the Fed might have imagined this past. times a year ago.
In addition, the Federal Reserve has already started to unwind some of its asset purchases.
On Thursday, the New York Fed announced that it would begin to phase out its portfolio of exchange-traded funds that invest in corporate bonds on June 7, the first step in unwinding the holdings of corporate bonds acquired during the pandemic.
Meanwhile, the greenback was already on solid footing before economic reports, with currency investors betting the data will come out better than market forecast.
In addition, risk sentiment has deteriorated as investors have become cautious, which tends to strengthen the greenback.
However, other factors at play, such as a weaker crypto space as well as recent moves throughout this week by the People’s Bank of China which mainly intervened to weaken the onshore yuan, are helping to support the greenback. and consequently to weigh on the prices of gold.
This prompts traders to look to the USD / CNY for a broader direction of the market and greater force could suggest more pressure on latent short positions in the USD.
As for the inflation outlook, analysts at TD Securities note that “global food prices have risen at the fastest rate in a decade according to the UN, fueling fears of inflation in the markets.”
On the flip side, analysts have warned that “if inflation is indeed transient, we will likely see a prolonged period of super-easy monetary policy, suggesting that the market prices for the Fed hikes are too much.” belligerent and ultimately that gold prices could firm up further.
Gold technical analysis
As noted above, the price has broken a key short-term support structure.
On the 4 hour chart it is shown that the old dynamic support was broken, retested as a countertrend that held up and then gave way to a sell off.
Price has since hit an earlier area of weekly and shorter-term liquidity and has started to correct from there.
One would expect price to correct to at least a 38.2% Fibonacci retracement of the bearish momentum where a confluence of previous lows is found.
Meanwhile, if the market continues to melt before such a retracement or after a significant correction, then the 1840/50 decline will be the focus of attention.
Gold Price Analysis: XAU / USD Brings $ 1,857 Target After Big Crash – Confluence Detector