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A potential false bullish breakout in Gold

02 July, 2014

Βy Jameel Ahmad, Chief Market Analyst at FXTM

Over the previous fortnight, Gold has accelerated in valuation and extended above a downward channel on both the H4 and Daily timeframes. Demand for the safe-haven commodity increased following the emergence of political tensions in the Middle East and concern regarding the worst US GDP contraction in 5 years.

However, on Thursday afternoon the latest US non-farm payrolls are announced and I am cautious towards whether Gold is experiencing a potential false breakout, with an imminent pullback possible.

The US employment sector has continued to make impressive progress over the past couple of months. The United States recently recovered all of the 8.7 million domestic jobs lost during the recession. Additionally, over the previous four consecutive months, over 200,000 jobs have been added to the US economy. This had not been achieved since the beginning of the millennium and with Initial Jobless Claims continuing to record low numbers in May, there are foundations present for tomorrow’s NFP to raise confidence in the US economy.

Today’s ADP employment report suggested that 281,000 jobs were created by the United States in June. Although the ADP employment is preliminary and refrains from guaranteeing full accuracy, this would represent a 65,000 advancement on last month. A confirmation of this figure would also signify the third strongest NFP release in over two years.

In regards to the technicals, both the Stochastic Oscillator and RSI are suggesting that Gold is currently edging very close to the overbought boundaries. Possible upcoming support levels are located at 1313, 1290 and 1277.

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