On the preceding Friday, the price of Gold experienced significant volatility following the publication of two pivotal economic reports. Initially, the US Non-Farm Payrolls (NFP) report surpassed expectations, leading to a momentary reduction in expectations for interest rate cuts and a sudden downward spike in the market. However, the price swiftly reversed course as a closer analysis revealed that the underlying data did not reflect as positively as initially perceived.
Shortly thereafter, the release of the ISM Services Purchasing Managers' Index (PMI) provided a genuine surprise. Not only did the data fall short across various metrics, but the employment sub-index plummeted to levels reminiscent of the dot-com recession, the global financial crisis, and the COVID recession. While this development initially fuelled a surge in Gold prices, an unexpected turn of events transpired as the price reversed course and concluded the day lower.
In the broader context, the trajectory of Gold prices is expected to continue its upward trend as long as the market persistently factors in heightened expectations for additional interest rate cuts.
Examining the daily chart reveals a consistent descent in Gold prices since encountering resistance at 2080, propelled by robust US data releases. Despite last Friday's emergence of two lackluster reports, the downtrend in price has not reversed. From a risk management standpoint, potential buyers might find an attractive risk-to-reward setup near the trendline, coinciding with the 61.8% Fibonacci retracement level, creating a confluence of support.
Conversely, sellers would seek confirmation of a bearish scenario by witnessing a break below the mentioned trendline. Such a move would not only invalidate the bullish setup but also potentially pave the way for an extension of the decline toward the 1972 level. This delineates the critical juncture at which market participants, whether buyers or sellers, are strategically evaluating their positions based on prevailing technical indicators.
Examining the 4-hour chart provides a clearer perspective on the market dynamics, notably the sharp downward movement following the NFP report and the subsequent upward surge triggered by the release of the ISM Services PMI. Sellers strategically utilized the downward trendline as a point of leverage, positioning themselves for a potential descent towards the significant upward trendline near the 2010 level.
Conversely, buyers are poised for a resurgence. To validate the resumption of the uptrend and position for new highs, they would require the price to break decisively above the downward trendline. This key level represents a pivotal point where market participants are actively assessing the directionality of the market, with sellers anticipating further declines and buyers eyeing an opportunity for renewed upward momentum.
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