Gold Analysis - XAU/USD: Supported at Fib 78.60% level, rebound likely?

The XAU/USD pair (gold prices in terms of the US dollar) was relentlessly offered on Wednesday and cracked through the key Fib 61.80% support (Sept rally) located 1120.65, triggering a renewed sell-off. The prices accelerated the drop to $ 1111.60 levels, just ahead the next Fib 78.60% Fib retracement of the same rally located at 1110.60. The move was well anticipated as the greenback was bolstered after the US private-sector employment data released by ADP showed 200k jobs added in September, beating expectations for a 190k increase. While markets ignore dismal Chicago PPMI report. The pair remained pressured even though the Fed Chair Yellen spoke nothing on the monetary policy outlook, as the main focus now remains Friday’s NFP.

As for today’s trade so far, XAU bears took a breather after a five-day losing streak as gold traders appear cautious and have turned on the side-lines ahead of tomorrow’s highlight – the US non-farm payrolls data which might have major impact on the Fed’s interest rate outlook. The prices continue to mire near fresh two-week lows struck at 1111.07 in the European morning and look to pose a minor rebound on the US jobless claims and manufacturing data, which are expected to come in weaker than the previous reading.

Technicals – below estimates US data could aid the recovery

On 4 hour charts, the prices seem to have bounced-off a major support at the Fib 127.20% retracement of last week’s rally, located above 1111 and now attempt a tepid-recovery towards the daily highs posted at 1116.39. A break above the last, the prices could climb further for a test of the hourly 10-MA at 1118.90 and the hourly 100-MA placed at 1123.92. This case will hold true if the US datasets miss estimates. While the downside seems limited to the above mentioned Fib support. However, in case the prices breach the last, selling pressure is likely to intensify drowning the pair towards 1100 – psychological levels. The RSI has rebounded higher near 30, also pointing to further upside in the session ahead.

On daily charts, the daily RSI has turned flatter around 44 and also indicate potential for a minor rebound towards the 50-DMA resistance located at 1118.90, beyond which a retest of the Fib 61.80% support-turned resistance (Sept rally) will come into the picture. A failure to break above the last, prices could once again fall back towards the afore-mentioned Fib 78.60% support. On breach of the last, a test of 1100 levels becomes imminent.