- Gold reversed its direction after climbing above $ 1,830 on Wednesday.
- The renewed strength of the USD does not allow the XAU / USD to gain traction.
- Key technical levels for gold remain intact despite strong fluctuations.
After rising and falling in a relatively tight range above $ 1,800 and closing flat on Monday and Tuesday, the pair XAU/USD it gained traction and jumped to a daily high above $ 1,830. However, the renewed strength of the USD forced the pair to reverse its direction during US trading hours. At time of writing, gold was virtually unchanged on the day at $ 1,810.
Hours earlier, data released by Automatic Data Processing (ADP) Research showed private sector employment in the US increased by 330,000 in July. With this impression below market expectations of a 695,000 increase, the US dollar came under selling pressure. Reflecting the general weakness of the USD, the US Dollar Index (DXY) fell to a daily low of 91.90.
Other US data revealed that business activity in the service sector expanded at an unprecedented rate in July. ISM’s services PMI rose to a new series high of 64.1 from 60.1 in June. This reading beat analysts’ estimate of 60.4 and helped the USD limit its losses.
More importantly, aggressive comments from Fed Vice Chairman Richard Clarida provided a strong boost to the dollar and weighed heavily on the XAU / USD.
Speaking at an online event hosted by the Peterson Institute for International Economics, Clarida noted that she would support announcing a moderation in Fed asset purchases later this year. Regarding the outlook for rates, Clarida said that it expects the conditions to increase rates to be met by the end of 2022.
Following these comments, the DXY spiked higher and hit a new weekly high of 92.30. At time of writing, the index was up 0.2% to 92.25.
On Thursday, the Trade Balance of Assets and Initial Unemployment Claims reports will be included in the US economic record. However, market reaction to this data is likely to remain short-lived ahead of the Non-Farm Payroll (NFP) report. ) on Friday.
Gold technical outlook
Despite the sharp fluctuations witnessed on Wednesday, the short-term technical outlook for gold remains neutral with a slight bearish bias as buyers failed to hold the price above the 200-day SMA. Meanwhile, the Relative Strength Index (RSI) indicator on the daily chart continues to move sideways near 50, confirming the indecision of the pair.
On the upside, the 200-day SMA continues to act as dynamic resistance around $ 1,820. Should gold achieve a daily close above that level, the next hurdle could be seen at $ 1,830 (Fibonacci retracement 38.2% of the April-June uptrend) before $ 1,835 (July 15 high) .
$ 1,810 (20-day SMA) lines up as interim support before the critical $ 1,800 level, where the 100-day SMA and 50% Fibonacci retracement are located, and $ 1,790 (July 23 low, static level ).