Rallies On Soft USD, Technical Consolidation Still In Play

Gold has rallied as the USD softens in the wake of the U.S. weekly jobless claims data, with spot peaking at $2,338.8/oz so far, before backing off to $2,030/oz.

• The reaction to the data highlights the likely growing asymmetry when it comes to the market reaction surrounding U.S. labor market data.
• Markets are likely to be more sensitive to downside surprises after Fed Chair Powell’s reference to an unexpected deterioration being a potential catalyst for rate cuts.
• Cross-market, U.S. STIR pricing is off the recent hawkish extremes, but USD positioning remains long, based on almost all the measures that we have seen.
• Technically, gold remains in consolidation mode.
• A bearish short-term condition is intact. The precious metal has recently traded through the 20-day EMA highlighting a corrective cycle.
• A continuation lower would signal scope for an extension towards $2,255.0/oz, the 50-day EMA.
• Note that a short-term bear cycle has allowed a significant overbought condition to unwind.
• The key resistance and bull trigger is at $2431.5, the recent Apr 26 high. The April 12 high ($2,352.6/oz) provides some protection ahead of there.