Technical Analysis

Gold – XAU/USD Analysis – June 04, 2021

By LonghornFX Technical Analysis
Jun 4, 20214 min

Upward Channel Breakout

Gold dropped massively on Thursday to its lowest level in 12 days below $1900 after remaining under consolidation for more than a week. Gold fell more than 1% amid the latest comeback in the U.S. dollar on the back of stronger-than-expected macroeconomic data for the day. The U.S. Dollar Index that measures the greenback value against the basket of six major currencies jumped on Thursday and reached its highest since 14th May at 90.55 after remaining under consolidation for the previous five consecutive sessions. The U.S. Treasury yield on a 10-year note also surged on Thursday after falling continuously for the last four days and reached 1.628%.

The U.S. dollar and U.S. Treasury yields recovered their previous losses and jumped on Thursday after the stronger than expected U.S. macroeconomic data release. The global equities also stepped back from record highs after investors studied a record uptick in job growth that provided clues about the better-than-expected economic recovery.

On Thursday, data reported that the number of Americans filed for jobless claim benefits reduced beneath 400K for the first time since the pandemic started more than a year ago. This report from the U.S. Labor Department pointed towards the labor market's strength and added the greenback value that ultimately weighed on the yellow metal. At 16:30 GMT, the Challenger Job Cuts for the year dropped in May to-93.8% compared to the previous -96.6% and had a null effect on the U.S. dollar.

At 17:15 GMT, the ADP Non-Farm Employment Change reported that about 978K jobs were added during May against the forecasted 645K and supported the U.S. dollar that dragged gold prices lower. At 17:30 GMT, the Unemployment Claims dropped during last week to 385K against the predicted 400K and supported the U.S. dollar, which added further gold pressure.

The Revised Non-farm Productivity for the quarter remained flat with the expectations of 5.5%. The renewed Unit Labor Costs for the quarter rose to 1.7% against the projected -0.4% and supported the U.S. dollar that added further losses in the metal. At 18:45 GMT, the Final Services PMI remained flat to the expected 70.4. At 19:00 GMT, the ISM Services PMI surged to 64.0 against the anticipated 63.0 and supported the U.S. dollar that added more downward pressure on the precious metal.

The long-awaited and closely watched ISM Services PMI also reported expansion in the sector that offered further clarity on the faster-than-expected pace of economic recovery. On the other hand, concerns about inflation were raised as the need for massive monetary policy came under question once again. However, gold prices extended downward momentum on Thursday and fell more than 1% as the strengthening labor market pushed the dollar on the upside.

Meanwhile, another reason behind the declining prices of yellow metal could be the reduced demand for safe-haven as a new report about global coronavirus vaccine inoculations came in front. According to an AFP database, about 2 billion coronavirus vaccines have been inoculated throughout the globe. This target was achieved after the first vaccination campaign against coronavirus starter six months ago. The report suggested that more than 2 billion vaccine shots have been administered in 215 countries.

Gold Intraday Technical Level

Support Resistance

1855.90 1901.50

1838.50 1929.70

1810.30 1947.10

Pivot Point: 1,884.03

Gold - XAU/USD - Technical Outlook

The precious metal gold has traded sharply bearish at 1,869 level, having violated an upward channel at 1,897 level. Gold has now entered the oversold region, as we can see on the MACD indicator. With this, the odds of bullish correction remain high, and gold’s next resistance holds at the 1,873 level. The 50 periods EMA suggests a strong bearish bias among investors as EMA value holds at the 1,897 level. Gold’s fresh support holds at 1,852 and 1,844 levels today. The primary focus of traders will remain on the U.S. Nonfarm Payroll figures as this typically drives dramatic movement in the U.S dollar-related pairs. All the best and have a lovely weekend!


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