Gold is on track to end the day in the green for the fourth day in a row.
The next major resistance level for XAU/USD is $1,800.
If sellers drag the market below the 100-day SMA, gold’s bullish momentum may be lost.
Following a dramatic rebound in the second half of the previous week, XAU/USD has continued to rise and now appears to be on track to complete the fourth trading day in a row in the green. Gold was trading at $1,792 as of this writing, up 0.26 percent on the day.
Gold’s movements were relatively restrained at the start of the week due to the lack of high-tier macroeconomic data releases and fundamental changes. Furthermore, due to the US Independence Day vacation, trading conditions were thin throughout the day.
The US Bureau of Labor Statistics revealed on Friday that nonfarm payrolls (NFP) increased by 850,000 in June. Although this number exceeded market expectations of 700,000, the greenback was once again under selling pressure ahead of the weekend. The Labor Force Participation Rate stayed constant at 61.6 percent, and Average Hourly Earnings increased by 3.6 percent year over year, falling short of the market consensus of 3.7 percent. The US Dollar Index fell 0.3 percent on Friday, reflecting broad-based USD weakness.
The ISM Services PMI data from the United States will be scrutinized on Tuesday for new impetus. The Prices Paid component of the ISM Manufacturing PMI survey hit a new series high in June, and the USD began to gain strength against its rivals, according to the ISM Manufacturing PMI data released last week. A similar reading in the service sector with regard to input price pressures could make it difficult for gold to extend its recovery, and vice versa.
More crucially, the FOMC will publish the minutes from its June meeting. “We will be expecting for clarity on the probable timing for tapering after the rather hawkish dot plot and press conference,” TD Securities analysts predicted ahead of the event.
The Relative Strength Index (RSI) indicator is closing in on 50 on the daily chart, indicating that bearish pressure is easing. Furthermore, gold is hovering just above the 100-day SMA, which is currently around $1,790. Additional buyers are expected to be attracted if the stock closes above that level on a daily basis. However, Monday’s move appears to be technical in origin, and sellers may want to maintain control unless a fundamental development supports the rebound.
On the upside, the next substantial barrier is around $1,800 (psychological level, Fibonacci 50 percent retracement of April-June rally), followed by $1,810 (20-day SMA) and $1,825 (Fibonacci 50 percent retracement of April-June uptrend) (Fibonacci 38.2 percent retracement).
Supports are positioned at $1,790 (100-day SMA), $1,770 (Fibonacci 61.8 percent retracement), and $1,750, respectively (June 29 low)./n
