Gold prices rose $2.17 an ounce on Wednesday, supported by a declining dollar. XAU/USD initially tested the support in the $1297-$1296 area but recouped losses after data on employment came out weaker than forecasts. The private sector added 178000 jobs in May, according to the ADP National Employment Report. ADP’s data is treated as a kind of preview for the monthly government report, though these figures aren’t always accurate in predicting the outcome. U.S. stocks recovered most of their losses as the political turmoil in Italy showed signs of easing.
The bears have the overall technical advantage, with the market trading below the daily Ichimoku cloud. Negatively aligned Tenkan-Sen (nine-period moving average, red line) and Kijun-Sen (twenty six-period moving average, green line) on the daily chart also supports this view. However, the short-term charts suggest that a test of 1311 is likely if the resistance in the 1307.50-1306 area is broken. The bulls will have to overcome this barrier to set sail for 1318/6. Once above there, the market will be aiming for 1326/3.
If the market fails to break through, keep an eye on the support at the 1296 level, which happens to be the bottom of the 4-hourly cloud. A break down below 1296 implies that XAU/USD will revisit 1292.50-1290. The bears have to produce a daily close below 1290 to take the reins and make an assault on the next strategic support in the 1287.40-1286 zone. Below there, the 1282/1 area stands out as a key technical support.
