Gold, Chart of the Week: XAU/USD bulls could have some staying power

Gold price rallied hard on Friday as the US Dollar sold off on a mixed labour market report that overall still shows that the US economy remains hot despite a series of interest-rate hikes from the Federal Reserve. However, wage growth slowed and the unemployment rate increased as more people entered the labor market.

Nevertheless, a significant repricing across the curve and in the terminal rate weighed on the US Dollar due to weaker-than-expected wages. The Fed funds rate implied upper bound fell from 5.89% to 5.5% and the probability of a 50bp hike in March declined substantially.

However, as analysts at TD Securities pointed out, ´´the market may have overplayed its hand however. With risk sentiment fragile and our newly revised (higher) terminal forecast, extending US Dollar softness looks premature (particularly ahead of Consumer Price Index data).´´ The analysts explained that while the market is pricing a soft landing, they think that the Fed will continue hiking and remain in restrictive territory. 

The weekly DXY chart is as follows:

This chart analysis forecasts a meanwhile soft US Dollar that could potentially find demand on a continued bearish correction in a 50% mean reversion to 103.35 resulting in a move higher and in line with the broader bullish longer-term trend. 

The daily chart shows a slightly different prospect in the possibility of a break in structures as being the 104.09, 103.76, and 102.64 lows, the latter being a 61.8% Fibonacci retracement level that meets prior resistance.

Both scenarios are meanwhile bullish for the Gold price:

The weekly and daily charts analyzed respectively above, offer room to go to the upside before prospects of meaningful resistance. On the 4-hour timeframe, however, there are prospects of a meanwhile correction into the Friday rally for the opening balance as follows:

Ultimately, the downside target for the bears is the 200 DMA near $1,1770.