Gold Price Forecast: XAU/USD bears thrive below $1,990 as traders eye US jobs data

Gold price is defending previous recovery gains above the $1,960 level, as the United States Dollar (USD) attempts a tepid bounce after the US House of Representatives passed the debt agreement to avert a default.

All eyes remain on the US jobs data and ISM PMI

Markets cheer the upbeat mood underpinned by strong Chinese Caixin Manufacturing PMI data and the US debt deal House win. News that the United States debt agreement got the House approval put a temporary bid under the US Dollar across the board. However, renewed dovish expectations surrounding the US Federal Reserve (Fed) interest rates outlook is likely to cap the upside in the Greenback unless the US ADP Employment Change data saves the day for the US Dollar bulls.

Gold price witnessed a good two-way price action a day before, although it has been consolidating the recent rebound this Thursday. Wednesday’s speeches from Fed officials prompted investors to assess the prospect of a pause in interest-rate hikes by the Fed this month.

Regarding interest rates, Philadelphia Federal Reserve Bank President Patrick Harker favored a pause at the next meeting. In a similar tone, Fed Governor Philip Jefferson said that pausing rate hikes at the next FOMC meeting would give time to analyze more data before making a decision about the extent of additional tightening.

In the face of dovish Fedspeak, the probability of a 25 basis points (bps) Fed rate hike in June dropped from about 62% to 38%. Increased bets of a Fed rate hike pause triggered a sharp sell-off in the US Dollar and US Treasury bond yields, lifting the non-yielding Gold price to a five-day high of $1,975.

Investors turn their attention toward the ADP Employment Change data from the United States later in the day, which is expected to show that the US private sector added 170K jobs in May, slowing from an above-forecast 296K figure registered in April. A print above the 200K mark is needed to revive hawkish Fed bets and, in turn, refuel the US Dollar’s upside.

The US ISM Manufacturing PMI and its subindices will be also closely watched by Gold traders for fresh hints on the Fed’s interest rates outlook. The headline ISM Manufacturing PMI is seen a tad lower at 47.0 in May, extending its contraction. These data will set a stage for Gold traders before Friday’s critical US Nonfarm Payrolls report.

Gold price technical analysis: Daily chart

Gold price continues to be a ‘sell on rise’ trade, as the 21 and 50-Daily Moving Averages (DMA) bearish crossover remains in play while the 14-day Relative Strength Index (RSI) stays below the midline, despite a recent uptick.

Immediate support awaits at the previous day’s low of $1,954, below which the $1,950 psychological level will get tested.

Further south, the bullish 100 DMA at $1,938 will challenge the bullish commitments. A daily closing below the 100 DMA support is critical to resume the correction toward the March 17 low at $1,918. 

Alternatively, Gold buyers will need to take out the multi-day highs at $1,975 to challenge the confluence resistance near $1,990, where the 21 and 50 DMA hang around. Acceptance above the latter is needed to confirm a bullish reversal.