As the US dollar wobbles due to a softer inflation outlook, gold bulls are looking for an upside extension.
To help gold bulls reach the daily 38.2 percent Fibo target, DXY must give out at daily support.
The XAU/USD pair fails to break through key resistance at $1,790.
The price of gold is looking bid at the start of the week, and it ended Friday higher for the third day in a row.
This time, the US dollar was a factor that had previously been factored into the Nonfarm Payrolls.
The greenback was rising alongside gold during mid-week trading, but gold was propelled forward this time by a weaker US dollar, which snapped four days of higher highs.
Following a mixed US Nonfarm Payrolls report for June, XAU/USD ended the day at $1,787.45, having traded between lows of $1,774.35 and highs of $1,795.10.
Despite the strong headline number, the dollar remained unchanged, despite the fact that 850,000 jobs were added last month, up from 583,000 in May.
However, attention was drawn to the Unemployment Rate, which increased to 5.9% from 5.8% in May, while the closely watched average hourly earnings, a measure of wage inflation, increased by 0.3 percent last month.
Because the wage component was lower than the consensus forecast of a 0.4 percent increase, traders do not expect the Fed to react to inflation in a hurry at this time.
Profit-taking has occurred ahead of the July 4th holiday, but once traders return, the greenback’s price action could become more interesting.
Despite a weak dollar on Friday, the dollar ended the week with a 0.5 percent gain as investors anticipate the Federal Open Market Committee meetings on July 27-28 and September 21-22, as well as the Jackson Hole Symposium on August 26-28.
Furthermore, gold will likely be under pressure if the US economy continues to produce positive data in the coming weeks, which will strengthen the greenback.
However, in the short term, the greenback is projected to weaken in the wake of Friday’s US jobs report, which markets regarded as “just right,” with higher beta currencies benefiting.
Meanwhile, following the Fed’s June hawkish tilt last week, gold investors continued to reduce net long positions, raising the possibility of a short-covering rally.
“Gold soared to $1,788/oz at the conclusion of the week as the market deemed the June payrolls data to be favourable to easy monetary policy for a long time, and rates fell,” according to TD Securities analysts.
“Given that there may be more angst over the Delta variant in the coming weeks, and less concern about tight labor markets supporting inflation, gold may well go above the 100 dma barrier to a new higher level, resulting in an increase in net long exposure.”
Should current support for the DXY lose way, the price will be on its approach to the W-neckline: formation’s
Meanwhile, gold prices broke and finished above the 1,782 1 July highs after retesting the 10-EMA on the 4-hour time frame, which served as support.
The chart below depicts the bulls’ progress in their quest for a weekly upside extension within a reverse head and shoulders pattern:
Meanwhile, the price is attempting to extend above the highs at this time, pointing to 1,808 as the 38.2 percent Fibo of the latest daily bearish impulse, which coincides with the lows of May 13th./n
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