The XAU/USD pair (gold prices in terms of the US dollar) experienced massive moves on Friday in response to the crucial US non-farm payrolls data which surprised markets to the downside. The prices bounced-off key support just ahead of 1100 barrier and spiked nearly $ 40 to fresh weekly highs at 1141.32 after the US dollar was smashed across the board as the NFP reflected a big miss (142k vs. 201k expected) and squashed hopes of Fed rate-hike this month or in this year, while every meeting remains live. The pair halted its five-day losing streak and jumped in a bid to test the 100-DMA then located near 1145, although failed to garner further supported and retraced to 1137.94 at close. However, the prices booked losses on weekly closing basis.
As for today’s trade so far, XAU/USD traded quite choppy, oscillating between gains and losses, as markets continue to digest the recent dismal NFP report and the gold rally sparked by the same. While the prices are seen correcting lower, mainly driven by a profit-taking spree after the recent strength. However, the correction is likely to remain short-lived as the greenback continues to suffer from the NFP-led rate hike delay set-back, which may re-fuel the gold upmoves. Later in the day, the US calendar offers a set services sector data which may also boost the gold bulls further. The ISM non-manufacturing report is expected to show a 58.0 reading in Sept versus 59.0 booked in August.
Technicals – point to limited downside risks before the rally resumes
On daily charts, the prices have formed a small doji indicating no clear direction in sight while the pair struggles around the key Fib 61.80% resistance (last week’s fall) located at 1136.52. The daily RSI has turned flattish, also pointing towards indecisiveness between the bulls and the bears. However, with the USD undermined by the latest US jobs report and the upcoming US services data is expected to weigh on the dollar bulls, the prices could stall their correction near 1131.30-1130.20 support zone – confluence of 10-DMA and Fib 50% of the latest drop. While to the upside, a sustain break above the Fib 61.80% level, the prices could head higher for a retest previous highs of 1141.32, beyond which the next target lies at the 100-DMA located at 1144.50 levels. Overall, the prices are expected to remain underpinned on dropping 2015 Fed rate hike bets.
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