While most assets gave up ground to the USD following the stellar June NFP report last Thursday, gold price quickly recouped its losses and even ended the day with a 67-cent gain. As of this writing, XAUUSD is virtually unchanged from its opening price around $1,773.45. However, technicals suggest that gold price could soon trade higher.
On the 4-hour time frame, it can be seen that the precious metal is testing support at the rising trendline when you connect the lows of June 5, June 15, June 17, June 18, June 26, and July 2. Reversal candlesticks around the trendline, around $1,773.50, could mean that XAUUSD may soon retest its July 1 highs at $,1788.88. If resistance at this price does not hold, we could soon see gold price rally to $1,920.60 where it topped in 2011.
What could push XAUUSD higher? Today, the USD ISM non-manufacturing PMI report is due to be released at 3:00 pm GMT. The consensus is for a reading of 50.0. If details of the report suggest potential weakness in the US economy, XAUUSD may trade higher.
On the other hand, it’s worth pointing out that gold price has recently made lower highs. Because this follows a series of higher highs, it suggests that a head and shoulders pattern could be in the making. A strong close below today’s Asian session lows at $1,769.80 could mean that XAUUSD may soon fall to neckline support at $1,763.50. If support at this price does not hold, it could trigger a bigger sell-off to $1,735.75 where gold price could test the 200 SMA for support.