XAU/USD advances due to USD weakness, eyes on NFPs

• The XAU/USD holds ground with bullish outlook at $2,055, showing a 0.78% rally.
• Weak Jobless Claims data weakened the USD during the session.
• Indicators stand near overbought conditions on the four-hour chart, a consolidation may be incoming.

In Thursday’s session, the XAU/USD was spotted rallying to $2,055, depicting a bullish outlook on the daily chart with buyers gaining ground. The momentum is echoed in the four-hour chart, where indicators show a levelling near overbought conditions, suggesting potential market saturation. On the fundamental side, markets await key Nonfarm Payrolls figures from January due on Friday while higher-than-expected weekly Jobless Claims figures from the US weakened the Greenback during the session.

Federal Reserve’s Chair Powell considered not likely that the bank will reach a level of confidence by March to start easing. As a reaction, the US Dollar rallied on Wednesday as markets started to give up on the expectations of sooner cuts, but incoming data will ultimately guide the bank on the timing of the easing cycle. In case labor markets figures on Friday come in weak, the metal could see further upside, as the expectations on lower interest rates tend to benefit non-yielding assets.

XAU/USD daily chart

XAU/USD levels to watch

The daily chart indicators reflect a bullish momentum in the market. With a positive slope in the Relative Strength Index (RSI) and increasing green bars in the Moving Average Convergence Divergence (MACD), it signifies a rising trend and an ongoing domination by the buyers. Contributing to this bullish sentiment, the asset’s position above the 20, 100, and 200-day Simple Moving Averages (SMAs) reinforces the current control held by the bulls.

Switching to a shorter timeframe view based on a four-hour chart, the indicators appear to flatten, with the RSI approaching the overbought territory, indicating a slowing momentum which is typical in highly bought situations. However, nearing the 70 threshold, it could signify a potential reversal as buyers might start taking profits, slowing the incoming buying force.