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Summary: Gold prices fell sharply after the release of the U.S. June ADP employment report and are now in a state of rapid correction. It is expected to maintain a positive tone until the release of the U.S. non-farm payroll data.

Fundamentals

On Thursday, gold prices fell sharply after the U.S. ADP private sector employment data for June far exceeded expectations.

Upbeat employment data showed that the labor market remains strong. Despite growing recession fears, the U.S. dollar was boosted by high borrowing costs and improved overall sentiment, which prompted investors to buy riskier assets.

Following the release of the US June ADP report, gold fell more than $20 and once again broke the 38.2% Fibonacci retracement level connecting $1,614-$2,080. A sustained break below the $1,900 support area would create a strong bearish signal, indicating that the larger downtrend will continue.

However, the downtrend was halted before reaching close to the psychological $1,900 mark. After a direct move higher without retracement in the Asian and European sessions on Friday, the bulls have managed to gain a firm foothold at that level. The follow-up is expected to remain accelerated to the upside, but the trading price is limited to the $1,890-$1940 range.

At the same time, weakness on the daily chart (with the momentum indicator RSI in negative territory or most moving averages in bearish configuration) adds to the bearish momentum in the short-term outlook.

Investors now await the late release of the U.S. non-farm payrolls report for June for more details on the state of the U.S. labor market.

Technical Analysis

After yesterday's selloff, gold prices are starting a restorative rise in the 1-hour chart. The initial resistance to the upside is at $1,918.

Major resistance lies around the bearish trend line at $1,925 and then at $1,930. An upside break of the $1,934 resistance could push gold to $1,938. Any more upside would probably stop at $1,940, otherwise, it will weaken the downward structure.

The initial support to the downside is located around $1,902. The first major support is located around $1,892. If it falls below this level, the bears may fall further. In the above scenario, the bears will fall towards the end of the downtrend of $1,880-$1,860.

Overall, the trend remains neutral for now. In terms of trading strategy, it's recommended to focus on layout.

In terms of trading strategy, it is recommended to focus on positioning and portfolio allocation.

Trading Recommendations

Trading Direction: Short

Entry Price: 1930

Target Price: 1900

Stop Loss: 1942

Valid Until: 2023-07-21 23:55:00

Support: 1909, 1902, 1892

Resistance: 1918, 1925, 1934