Will XAUUSD extend the bullish break on the US NFP?

  • Gold price holds on higher on Thursday as USD licks its wounds.
  • Reduced trading over the holidays could exaggerate the market’s reaction to the US NFP.
  • XAUUSD is testing bearish commitments at critical triangle resistance on the 1D chart.

The price of gold resumed fresh offers on Thursday and broke through the $1,850 mark to reach new monthly highs at $1,871, surpassing the previous week’s high of $1,870. In doing so, the yellow metal extended Wednesday’s rally from 10-day lows at $1,829. The main catalyst for gold’s rise was renewed weakness in the US dollar as overall market sentiment improved. Falling oil prices following OPEC+’s decision to boost production helped ease concerns about inflation and growth. Meanwhile, cautious remarks from Fed policymakers Lael Brainard and Loretta Mester, combined with a drop in ADP’s US jobs data, deepened the dollar’s decline. US ADP jobs came in at 128,000 in May versus 300,000 expected and 202,000 previously. US Treasury yields also fell amid an uptick in Wall Street indices as the negative correlation between the two related entities came back into play. Falling yields supported the non-yielding metal.

Looking ahead to the US NFP showdown, the price of gold pulls away from fresh monthly highs of $1,874 as the US dollar halts selling amid a fresh wave of buying seen in yields. Pre-NFP cautionary trading is also keeping bulls at bay as traders refrain from placing aggressive bets on the precious metal. The US economy is expected to add 325,000 jobs in May versus 428,000 booked in April. A pessimistic impression should add to the recent series of discouraging economic data in the United States, rekindling fears of a slowdown while ruling out aggressive expectations of Fed tightening in the short term. This could be negative for the dollar, which could help the yellow metal regain its bullish traction. Investors will also assess Fedspeak and US President Joe Biden’s speech for dollar valuations, impacting the price of gold.

It’s worth mentioning that gold’s reaction to the all-important NFP data could be overdone amid weekend flows and lessened market conditions during the holidays. The Chinese and UK markets are closed on their respective national holidays.

Gold Price Chart: Daily Chart

Thursday’s gold price rally tested the upper barrier of the three-week-old ascending triangle near $1,870.

Buyers are waiting for a sustained break above the latter on a daily closing basis to confirm a breakout of the triangle, which will open the doors towards the slightly bullish 100 Moving Average (DMA) at $1,888.

The next upside target is seen at the bearish 50-DMA at $1,893, above which a test of the $1,900 mark remains inevitable.

The 14-day Relative Strength Index (RSI) sits just above the midline, having broken through it the previous day, suggesting bulls may remain in control in the near term.

However, if the sellers regain control on an upside surprise to the NFP figure, then XAUUSD could pull back towards the psychological level of $1,850 – the previous key resistance.

Lower, the horizontal 21-DMA at $1,846 may come into play. The 200-DMA at $1,841 may help limit the short-term corrective decline.

The last line of defense for gold bulls is the uptrend line (triangle) support at $1,834.

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