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Summary: Gold prices found support around the $1,939 range. The primary bearish trend in the 4-hour chart is starting to reverse. The consolidation phase of the past few trading days may be overturned once the bulls take hold.

Fundamentals

Momentum in the U.S. labor market continues to slow. Last week, the number of workers filing initial jobless claims reached the highest level since October 2021. Data released Thursday by the U.S. Department of Labor showed that initial jobless claims rose by 28,000 to 261,000 for the week ended June 3. Despite the surge in claims, initial jobless claims remained at a level consistent with a tight labor market.

The U.S. Department of Labor reported last week that the U.S. added 339,000 jobs in May. Although the unemployment rate rose to a seven-month high of 3.7% from 3.4% in April, it remains low by historical standards.

On the market side, the surge in initial jobless claims is a sign of more cracks appearing in the labor market. Data released by the Institute for Supply Management (ISM) on Monday then showed that the services PMI fell in May, largely due to weakness in employment.

Market participants have been excluding the possibility of a shift in Fed policy due to consistent data showing strong employment and economic activity in the U.S. However, today's labor data appears to show some cracks in the job market, which could support the Fed's decision to pause interest rate hikes next week.

According to the CME FedWatch tool, the market perceives a probability of over 73% that the Fed will maintain interest rates next week. At the same time, the likelihood of another rate hike in July is less than 50%.

The latest employment data provide some support for gold prices as it supports the growing view that the Fed's aggressive monetary policy tightening is over.

Technical Analysis

After a sharp retracement from yesterday's $1,964-$1,970 range, gold managed to defend its recent technical advantage, influenced by data released by the U.S. Department of Labor.

With the reversal of the major bearish trend in the 4-hour chart, the focus for the near future is primarily on the upside. As gold has climbed above its 200-period SMA ($1,958), this suggests that range trading has turned bullish. Meanwhile, the Relative Strength Index (RSI) has climbed above 60.00, signaling continued upward momentum until reaching our target expectation of $1,999, which corresponds to the level of wave 4 of downward impulse waves. It is recommended to buy the dips.  

Trading Recommendations

Trading Direction: Long

Entry Price: 1968

Target Price: 1999

Stop Loss: 1939

Valid Until: 2022-06-22 23:55:00

Support: 1964, 1958, 1947

Resistance: 1970, 1985, 1993