Gold Price Forecast: XAU/USD struggles to break out of range despite USD selloff
- XAU/USD remains stuck in a relatively tight range on Monday.
- USD is facing strong selling pressure following upbeat US data.
- Risk-positive market environment is making it difficult for gold to attract investors.
The XAU/USD pair started the new week under modest bearish pressure and dropped toward $1,720 during the Asian trading hours but didn't have a difficult time staging a recovery. With the greenback losing its strength in the second half of the day, gold turned flat near $1,730. Nevertheless, the precious metal is struggling to preserve its bullish momentum and was last seen posting small daily losses at $1,727.50.
On Friday, the data published by the US Bureau of Labor Statistics showed that Nonfarm Payrolls in March surged by 916,000 to beat the market expectation of 647,000 by a wide margin. The positive impact of this impressive jobs report on market sentiment became apparent on Monday when American investors returned from the Easter holiday. The S&P 500 Index opened sharply higher and is currently sitting at an all-time high of 4,067, rising 1.2% on the day.
Additionally, Monday's data showed that the business activity in the US service sector expanded at its most robust pace on record with the ISM Services PMI jumping to a record high of 63.7 in March.
Although Wall Street's strong start to the day triggered a USD selloff, the risk-on market environment seems to be not allowing gold to find demand. Furthermore, the benchmark 10-year US Treasury bond yield is staying relatively resilient despite the upbeat mood around 1.74% and limiting gold's potential gains for the time being.
Gold technical outlook
On the daily chart, the Relative Strength Index (RSI) indicator is moving sideways near 50, confirming XAU/USD's indecisiveness. On a bullish note, the pair continues to float above the 20-day SMA and one more daily close above that level could force sellers to remain hesitant.
On the upside, the initial resistance is located at $1,730 (April 1 high) ahead of the key hurdle at $1,745. If gold manages to claim the latter, additional gains could be seen on the back of a technical buying pressure.
The first support is located at $1,725 (20-day SMA), followed by $1,720 (lower limit of the latest horizontal channel) and $1,700 (psychological level).
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Author
Eren Sengezer
FXStreet
As an economist at heart, Eren Sengezer specializes in the assessment of the short-term and long-term impacts of macroeconomic data, central bank policies and political developments on financial assets.
