After recording strong gains since the beginning of the week, the gold price (XAU/USD) is now approaching a key resistance zone when it is trading around USD4,177.43 as of 2:55 pm (MYT).
The market's focus tonight is on two high-impact economic data from the United States, namely ADP Employment Change at 8:15 pm and ISM Services PMI at 10:00 pm. Both of these data are expected to be the main determinants of market sentiment ahead of the Nonfarm Payrolls (NFP) report on Friday.
For traders, tonight has the potential to be a session that sees increased volatility, especially if the data reading deviates far from market expectations.
Current Market Sentiment
Current market sentiment is still influenced by two main factors, namely expectations for the Federal Reserve's (Fed) monetary policy and geopolitical developments in the Middle East.
While hopes for a US-Iran deal have dampened demand for safe havens, gold's rally is still supported by technical buying after breaking through several key resistance levels this week.
Meanwhile, most investors are opting not to take large positions ahead of the US jobs data, making any economic data tonight potentially a quick turnaround in market sentiment.
Why Tonight's Data Is So Important?
Markets are currently looking for early indications of whether the US economy is still strong enough to allow the Fed to keep interest rates high for longer.
The ADP Employment Change will provide an early indication of the strength of the US labor market ahead of the NFP report, while the ISM Services PMI measures the performance of the services sector, which accounts for more than two-thirds of the US economy.
If both data come in better than expected, it could strengthen the US Dollar and push up US Treasury yields, putting pressure on gold.
Conversely, a weaker reading could change market expectations for Fed policy and open the way for further gains in XAU/USD.
Today's Key Triggers (Malaysian Time)
Time (MYT) Data Impact
8:15 PM ADP Employment Change (July) ⭐⭐⭐ High
9:45 PM S&P Global Services PMI ⭐⭐ Moderate
10:00 PM ISM Services PMI ⭐⭐⭐ High
10:30 PM EIA Crude Oil Inventories ⭐⭐ Moderate
📈 Technical Analysis XAU/USD
Based on the H4 chart, gold prices managed to breakout from the consolidation zone around USD4,100–4,120 before surging to near USD4,180.
The market structure is currently showing the formation of Higher High (HH) and Higher Low (HL), indicating that bullish momentum is still dominating the market.
However, the price is now approaching the resistance area that was previously a rejection zone. This means traders should be cautious about possible profit taking if tonight's economic data supports the strengthening of the US Dollar.
Current Price
USD4,177.43 (2:55 PM MYT)
Key Technical Levels
Resistance
R1 : USD4,180
R2 : USD4,200
R3 : USD4,225
Support
S1 : USD4,150
S2 : USD4,120
S3 : USD4,100
Technical Bias
🟢 Bullish as long as the price remains above USD4,150.
A strong break above USD4,180 has the potential to open the way for further gains towards USD4,200.
However, if the ADP and ISM data are much better than expected, a correction to the USD4,150 to USD4,120 area is still considered healthy as long as the Higher Low structure is not broken.
