Gold Price Forecast: Bulls coming back up for air towards 38.2% Fibo target

• Gold bulls looking for an upside extension as US dollar wobbles on a softer inflation outlook.
• DXY needs to give out at daily support to help gold bulls towards the daily 38.2% Fibo target. 
• XAU/USD fails to clear key resistance at $1,790

For the start of the week, the price of gold is looking bid and it ended on Friday higher for the third day in a row.

The US dollar was a factor this time around that had otherwise been supported into the Nonfarm Payrolls.

During the mid-week business, the greenback was rising at the same time as gold but this time around gold was propelled forward by a weaker US dollar which snapped 4-days of higher highs.

XAU/USD was ending at $1,787.45  by the close and had travelled between the lows of $1,774.35 and the highs of $1,795.10 following a mixed US Nonfarm Payrolls report for June.

Despite the strong headline number, the dollar failed to move higher even though 850,000 jobs last month had been created after rising 583,000 in May.

There was a focus, however, on the Unemployment Rate which rose to 5.9% from 5.8% in May, while the closely watched average hourly earnings, a gauge of wage inflation, rose 0.3% last month.

The wage component was lower than the consensus forecast for a 0.4% increase and, therefore, traders do not see there being any rush from the Fed to react to inflation at this time.

Profit-taking has ensued ahead of the July 4th holidays but as traders return, price action in the greenback could get interesting. 

Despite a soft dollar on Friday, it posted the week on a positive note, with an 0.5% gain as markets look ahead to the Federal Open Market Committee meetings on July 27-28 and September 21-22, along with the Jackson Hole Symposium August 26-28.

.Moreover, gold will likely come under pressure if there is an environment of continuous strong US data over the coming weeks that should lend support to the greenback.

However, for the immediate future, the greenback would be expected to easeoff in the wake of Friday’s US jobs report, which markets took a “goldilocks” view of, falling into the hands of the higher beta currencies. 

Technical analysis, DXY & gold

From a technical standpoint for the DXY, should current support give way, then the price will be en route to the neckline of the W-formation:

Meanwhile, the price of gold broke and closed above 1,782 1 July highs after retesting the 10 EMA on the 4-hour time frame which acted as support.

The following is an analysis that shows the progress by the bulls seeking a weekly upside extension within a reverse head and shoulders:

Live market progress

meanwhile, the price is seeking an extension above the highs at this juncture which opens the case for 1,808 as being the 38.2% Fibo of the last daily bearish impulse which has a confluence with the 13th May lows.