Gold, US Dollar, EUR/USD Technical Analysis Ahead of US Employment Data

The upcoming US employment data and the US election have substantial implications for the US dollar (DXY), EUR/USD, and gold (XAU). The US dollar consolidates at resistance as caution builds ahead of high-impact economic releases. The EUR/USD pair rebounds from the 1.0790 support. Investors focus on Friday’s nonfarm employment data and the upcoming US presidential election, anticipating these events will significantly impact market sentiment. A possible victory by former President Donald Trump could lead to significant policy shifts. This prospect drives the US dollar’s upward momentum as markets consider fiscal and monetary policy implications.

The goods trade balance posted a larger-than-expected deficit of $108.2 billion in September, raising concerns over trade imbalances and potential economic slowing. Employment-related data from the Job Openings and Labor Turnover Survey (JOLTS) showed fewer job openings in September. This may signal a cooling labour market. The ADP private employment report will provide a glimpse of the US labour market on Wednesday. Additionally, on Thursday, the core PCE price index and the employment cost index will be indicators to assess employment conditions. However, investors are closely watching Friday’s nonfarm employment change report, which will provide a more detailed view of employment trends. A strong nonfarm employment change report could bolster the dollar, putting additional pressure on EUR/USD.

Gold also reacts to these developments. Positive momentum in gold prices ahead of the employment data releases shows that investors are hedging against potential volatility. If the employment report indicates robust job growth, the dollar may strengthen further. However, the strength of the US dollar in October has not significantly impacted the gold market. This is because both assets are considered safe havens amid the current geopolitical crisis in the Middle East. However, any signs of economic slowing and increased uncertainty could increase demand for gold.

Gold (XAU) Technical Analysis

Gold Daily Chart – Sequence of Bullish Patterns

The price forms a series of bullish patterns on the daily chart, moving within an ascending broadening wedge. The price established a bottom within this wedge, marked by a double bottom in July and August 2024. Following this bottom, the price advanced.

The appearance of a descending broadening wedge pattern within the ascending broadening wedge signals further bullish action. The breakout from the descending broadening wedge led to a strong rally toward the red-dotted trend line. The price now breaks the trend line at $2,760 and is poised for an upward move ahead of the employment data release.

Gold 4-Hour Chart – Double Bottom

The 4-hour chart for gold also shows positive price action, with the price moving within an ascending channel pattern. A double bottom has formed along the channel’s midline, suggesting the potential for a further upward move. The initial resistance for this movement is $2780, as defined by the ascending channel’s resistance line.

US Dollar Technical Analysis

US Dollar Daily Chart – Correction

The US dollar continues to strengthen without any correction in October. This strength was due to the uncertainty of the US elections. The actual movement may become more apparent once the election results are released. The US dollar index has broken past the 103.90 resistance on the daily chart, and a retest of this breakout has initiated another buy signal, pushing the index higher. The target for this upward move is 105.60, calculated from the red trend line extending from October 2023. However, the index is showing short-term weakness and looks for a correction.

US Dollar 4-hour Chart – Correction from Resistance

The 4-hour chart shows that the index tries to find the short-term resistance at 104.50. The consistent rally in the US dollar index throughout October, with minimal corrections, indicates price strength. RSI has been above the mid-level for the past 30 days, which calls for a correction in the US dollar index.

EUR/USD Technical Analysis

EUR/USD Daily Chart – Price Rebounds from Support

The price is consolidating near the edge of a descending broadening wedge pattern. With the US dollar consolidating ahead of the US employment data, EUR/USD is rebounding higher. A move above $1.0870 will ease the bearish pressure in EUR/USD. However, a daily close below $1.0770 would likely sustain this downward momentum. In the case of a breakdown, the black dotted line provides support at the $1.0680 and $1.0615 levels. Nevertheless, the EUR/USD appears extremely oversold, as indicated by the RSI.

EUR/USD 4-Hour Chart – Price Consolidation at Support

The 4-hour chart shows bearish pressure on EUR/USD. As the US dollar starts correction, EUR/USD is rebounding from the support levels. A break above $1.0870 will relieve the bearish pressure on EUR/USD. RSI indicator shows further upside on the 4-hour chart.