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Gold’s 2-week rebound spoiled by NFP data

  • Gold has fallen victim to strong US jobs data

Gold experienced some notable gains in the 2 weeks leading up to the release of the Non Farm Payrolls (NFP) data. However, this trend appears to have been spoiled with a sharp decline in gold at the end of last week and continuing at the start of this week. 

The solid NFP report, which registered 263K jobs added to the US economy in September, validated the FED's hawkish stance toward interest rate hikes. As such, the US dollar gained, and gold has fallen victim. The market now expects another 75-basis-points hike at the next FOMC meeting, which could possibly send Gold to another low. 

On the technical side, looking at the 4-hour chart, gold rejected at the US$1,730 resistance level coinciding with overbought conditions, according to the Kirill Channel Indicator. The Kirill Channel Indicator attempts to show overbought and oversold zones.

XAU/USD 4H, with Kirill Channel Indicator

The price briefly recovered at $1,700 but bounced from $1,725 before emphatically breaking the $1,700 support area on its second test, on its way down to Kirill’s profit taking line near $1,666. 

Traders looking for further drops might want to wait for confidence in the $1,660 support area to waiver, or for more candles to close below the profit-taking Kirill line. Possible targets could be $1,645, which sits just above the first oversold condition line. 

If the profit-taking line acts as a bounce-point, possible upside targets could include $1,670-5 and $1,695. However, better buying opportunities might exist if gold bounces at points that coincide with the green oversold bands of the Kirill channel. Bounce-points to look out for could include $1,650, $1,640, and $1,627. 

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