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Gold Rallies as USD Dips on Mixed NFP Report: Technical Analysis & XAG/USD Overview

Gold Prices Rally as USD Sells-off

On Friday, the price of Gold saw a rally caused by a selloff in the USD. This selloff was in response to a mixed Non-Farm Payrolls (NFP) report from the US, which indicated that the economy remained hot despite successive rate hikes by the Fed.

However, the report also showed a decrease in wage growth and an uptick in the unemployment rate as more people looking for jobs. As a result, the curve had significant repricing, and the terminal rate dragged down the USD.

The Federal Reserve’s funds rate also indicated a decline in the upper bound, dropping from 5.89% to 5.5%, and the probability of a 0.50% rate hike dropped substantially. This decline was due to weaker-than-expected wages, which led to a reassessment of the future trajectory of interest rates.

Despite this, some analysts at TD Securities believe that the market’s reaction to the NFP report may be premature. They note that the move by the market to price in a soft landing because they think the Fed will continue to raise rates and remain in the restrictive territory is premature. Instead, the analysts believe investors should wait for Friday’s Consumer Price Index (CPI) data before reassessing their expectations.

Technical Analysis

Technical analysis suggests the current soft dollar may find demand as it trends in a bearish correction towards a 50% reversion to hit 103.35 on the weekly DXY chart. This move could indicate a broader bullish trend in the long term. However, the daily chart offers a different prospect, with the possibility of breaking structures at the 102.64, 103.76, and 104.79 lows.

The 102.64 level is at the Fibonacci retracement level of 61.8%, which is a mark that meets initial resistance. This scenario remains bullish for the price of Gold. The daily and weekly charts allow bullish runs before meeting meaningful resistance levels. However, the 4-hour chart suggests the possibility of a correction in the Friday rally. The ultimate seller target price is the 200-day moving average for Gold, hovering around $1,770.

XAG/USD Technical Overview

The price of Silver is currently holding on to $20.60 as it attempts to pull back into the short-term resistance levels seen on Monday. Despite a 3-day uptick streak, the day’s rebound was the lowest since early November 2022. This low indicates a potential weakening of the bullish momentum, with sellers starting to gain traction in the market.

On the technical front, the looming sellers have crossed the MACD, indicating consolidation above the 200 simple moving average. Additionally, the cross to a two-week resistance keeps the sellers hopeful of returns, which means that they could continue to exert downward pressure on the price of Silver soon.

The Bullion will retest the two-week support currently hovering at $20.40. If this level is broken, the metal’s downside may be worsened by crashing the $20.0 psychological level, which could trigger further selling pressure. The lows at the $18.85 psychological price level will be in focus following the monthly low at $19.95.

Recovery remains out of reach unless the pair can stay below the downward-sloping resistance around the $20.90 level. If the bulls can control and consolidate the price above the $21.00 mark, they may become optimistic and target the $21.30 level, which may act as Silver’s last line of defense.

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