XAUUSD Gold Market Analysis: Weekly Overview

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Fundamentals
Gold Price Movement: Last week's trading saw gold prices align with our expectations. Following the release of nonfarm payroll data, where the unemployment rate exceeded market forecasts, gold prices climbed above the June 7 high of $2,387 towards the end of the week.

Nonfarm Payroll Data: The June US nonfarm payroll report showed a slight increase in new jobs, surpassing expectations. However, revisions to April and May figures indicated a decrease of 111,000 jobs. The unemployment rate rose to 4.1%, higher than both previous and anticipated values, suggesting a cooling US labor market and increasing investor expectations for a September rate cut.

Interest Rate Expectations: Interest rate observation tools indicate over an 80% probability of a September rate cut, with expectations of two cuts this year. This has driven down US bond yields, favorably impacting gold prices. Given the high nominal and real interest rates, a rate cut would strongly support gold price momentum.

Market Liquidity: Despite last week's strong rebound, further upward movement for gold may be limited due to ongoing low liquidity conditions, which could persist into this week.

Technical Analysis
Resistance and Support Levels: The "head and shoulders" pattern led gold prices to touch the resistance range of $2,370-$2,390 last week, as anticipated. The completion of this pattern, along with oscillator signals, suggests a potential market decline.

Relative Strength Index (RSI): The RSI is turning downward at the neutral level of 50.
Stochastic Oscillator: The Stochastic Oscillator is smoothing in the overbought region.

Key Support Levels:

50-day SMA: $2,346
20-day SMA: $2,333
A break below these levels could lead gold prices to retreat to the neckline at the $2,300 range and potentially test the lower limit of the trading range at $2,276.

Key Resistance Levels:

Immediate Resistance: $2,370-$2,390
Psychological Barrier: $2,400
A successful close above $2,386 would accelerate the testing of the $2,400 psychological barrier.

Market Outlook: While the recent rise in gold prices has rekindled bullish hopes, breaking above or below the current range in the short term appears premature. We expect a broad range of volatile trading patterns to continue throughout the summer, with a primary strategy of buying low and selling high.

This analysis aims to provide a comprehensive and professional overview of the current gold market, highlighting key fundamentals and technical factors influencing price movements

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FED POWELL:

Federal Reserve Chair Jerome Powell is set to deliver his semi-annual testimony on Tuesday, a highly anticipated event that could provide significant insights into the central bank's future monetary policy.

As markets await his remarks, investors and analysts are keen to decipher any signals about the direction of interest rates and the Fed's approach to managing inflation and economic growth.

Powell's testimony comes at a pivotal moment, with the Fed Chair likely to face questions on factors such as the interest rate path, inflation, and the economic growth outlook.

He is also expected to speak on the key takeaways of the Fed's Semi-Annual Federal Reserve Monetary Policy Report, published last Friday, highlighting modest further inflation progress this year.

Investors are particularly focused on Powell's stance regarding future rate cuts. Data recently showed a sharp rise in expectations for a September rate cut by the Fed, although some believe the first rate cut will arrive in December.

In a note to clients Tuesday, analysts at Macquarie said they believe Powell's tone will be dovish.

"Last week's FOMC Minutes already displayed a shift in the Fed's tone, toward caring more about the loosening labor market and softening activity indicator," they wrote. "If Congress issues strong calls to have President Joe Biden abandon his candidacy, and if that raises the prospect that Donald Trump will win, it could raise US yields again.

"For good reasons, traders like to link Trump's policy agenda with inflation; they see policy rates being higher than otherwise under Trump 2.0, as we've discussed."

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