XAUUSD Current price: $1,713.
- Weaker-than-expected US employment figures spurred risk aversion ahead of the NFP release.
- Wall Street keeps fading its early week rally while Treasury yields pick up.
- XAUUSD is losing bullish strength, although further declines are not yet clear.
XAUUSD shed some ground on Thursday, currently hovering around $1,713.00 a troy ounce. The dollar has gathered momentum, particularly during US trading hours, as Wall Street opened in the red, holding into negative territory at the time being. Also, USD strength came from the hand of government bond yields, which resumed their advances and hold near fresh weekly highs.
US employment sector showing unexpected weakness
Ahead of the release of the September US Nonfarm Payrolls report, data from the sector surprised to the downside. On Tuesday, market players learned that the number of job openings drastically decreased in August, while laid-off and discharges remained above 1.5 million.
On Thursday, the Challenger Job Cuts report showed that, in September, US-based employers announced 29,989 cuts, up 46.4% from August and 67.7% higher than a year ago. Additionally, Initial Jobless Claims for the week ended September 30 unexpectedly increased to 219K, worse than the 200K anticipated. It’s worth noting, however, that the NFP report does not include data from the last week of the month.
Federal Reserve and Treasury yields
The discouraging figures created uncertainty about the US Federal Reserve's future decisions on monetary policy. At the beginning of the week, speculative interest was discounting the pace of quantitative tightening would soon decelerate. Tighter employment-sector conditions and mounting concerns about a potential recession were behind that logic. However, it does not seem that the labor sector is becoming less of an issue. A clearer picture may come on Friday with the Nonfarm Payroll report.
In this scenario, equities are on the back foot, while US Treasury yields picked up. The 10-year US note currently yields 3.80%, while the 2-year note rate is 4.21%. The USD currency finds support in this scenario.
Gold price short-term technical outlook
The daily chart for XAUUSD shows that it keeps losing bullish potential, although an upcoming decline seems unclear. Technical indicators turned south within positive levels, while the pair remains above a directionless 20 SMA. Also, buyers continue to defend the downside at around the 61.8% retracement of the latest daily slide at $1,707.70.
The near-term picture is quite similar, with the risk skewing to the downside but without a technical confirmation behind it. XAUUSD is currently holding above a bullish 20 SMA, which extends its upward slope above the longer ones, a usual sign of further gains ahead. Technical indicators, on the contrary, have extended their declines after reaching overbought conditions earlier this week. A clear break below the aforementioned Fibonacci support level should skew the scale towards the bears’ side, while bulls could have better chances if Gold surges above 1,735.14, last week’s high.
Support levels: 1,707.70 1,697.90 1,681.30
Resistance levels: 1,722.40 1,735.15 1,747.10
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