The intricate dynamics of the financial markets have taken center stage as the U.Sdollar index consolidates at 104.30 while gold prices experience a subtle rise to $2,777. This moment in time hints at a pivotal week ahead, particularly with the U.Snon-farm payroll report looming large as a critical catalystInvestors are keenly aware that robust growth in employment numbers may bolster the dollar’s strength, inevitably putting pressure on precious metals like gold and other currencies such as the euro.

As the week progresses, all eyes are fixated on the impending non-farm employment data, set to unveil on FridayThis report holds substantial weight, influencing not just the dollar but also the euro-to-dollar exchange rate and gold pricesThe dollar, appearing stagnant at critical resistance levels, reflects a cautious sentiment that is pervasive before such an impactful economic announcement

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The euro, on the other hand, is attempting a bounce back from a support level around 1.0790, a sign that market sentiment could shift depending on the forthcoming employment statistics.

Recent economic indicators raise concerns regarding trade imbalances and suggest that the U.Seconomy may be experiencing a slowdownThe September goods trade deficit ballooned to $108.2 billion, exceeding forecasts and igniting worries about the persistent trade gapLabor market data—highlighted by a drop in job vacancies—further hints at cooling in the employment sector, indicating that conditions are shiftingThe upcoming ADP private employment report sheds light on the current labor market trends, serving as a precursor to the non-farm payroll announcement.

Additionally, the core PCE price index, along with the employment cost index, scheduled for release on Thursday, will serve as critical measurements to gauge the health of the job market

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However, it is the non-farm employment change report on Friday that holds the most potential to sway market sentiment profoundlyA strong showing could propel the dollar to new heights, applying additional pressure on the euro against the dollar.

Gold has also begun reacting to these developments, showing a positive trend leading up to the employment report as investors hedge against potential volatilityShould the employment figures indicate strong growth, the dollar may gain further momentumNonetheless, the dollar’s strength has not significantly impacted gold prices in October, as both assets are perceived as safe havens amidst rising geopolitical tensions in the Middle EastStill, any signs of economic slowdowns and increased uncertainty may lead to a spike in demand for gold as a protective asset.

Technical Analysis of Gold

Daily Gold Chart – Formation of Bullish Patterns

On the daily chart, gold prices have constructed a series of bullish formations within an ascending expanding wedge

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This pattern has grounded a bottom, marked by double bottoms in July and August of 2024. Following this bottom formation, prices have started to ascend.

The presence of a descending expanding wedge within the rising wedge suggests further bullish movementA breakout from the descending wedge has led to a strong rebound towards the pivotal red point trendline, with current expectations for a price increase above the $2,760 trendline ahead of the employment data release.

4-Hour Gold Chart – Double Bottom Confirmation

The 4-hour gold chart reinforces this optimism, depicting a price movement following an upward channel modelThis channel's midline has established a double bottom, signaling the potential for additional upward movesThe initial resistance for this upward trajectory stands at $2,780, delineated by the ascending channel's resistance line.

Technical Analysis of the U.S

• Contradictory Data Poses Challenge for the Fed
• Liquidity Risks in the U.S. Treasury Market
• Outlook on Interest Rate Trends in China and the U.S.
• Profit Pressures on Financial Payment Institutions
• The Peak of U.S. Inflation: An Ongoing Trade

Dollar

Daily Dollar Chart – Correction Emerging

The U.Sdollar has shown a remarkable strength throughout October, seemingly avoiding any form of correctionThe dollar index has broken through significant resistance at 103.90, with subsequent retests of this breakout prompting additional buy signals, pushing the index upwardThe upward target is set at 105.60, as calculated based on the extended red trendline from October 2023. However, the index appears to be displaying signs of short-term fatigue, indicating a potential retreat.

4-Hour Dollar Chart – Resistance Level Testing

Through a 4-hour lens, the index seeks short-term resistance around 104.50. Throughout October, the dollar index has maintained a robust upward trajectory with minimal retracement, demonstrating a strong price action

The RSI has remained above mid-level for the past 30 days, suggesting that a pullback may be imminent for the dollar index.

Technical Analysis of Euro/Dollar

Daily Euro/Dollar Chart – Price Rebounding from Support

The euro/dollar price is currently consolidating near the edges of a downward expanding wedgeWith the dollar undertaking consolidation ahead of the labor data release, the euro/dollar is experiencing a reboundA trusted breakthrough at $1.0870 would alleviate some of the bearish pressure on the euro/dollarNevertheless, any daily closing price beneath $1.0770 could sustain this downward trendIf such a drop occurs, black dashed lines provide support around $1.0680 and $1.0615 levelsNonetheless, as indicated by the RSI, the euro/dollar appears to be significantly oversold at present.

4-Hour Euro/Dollar Chart – Price Consolidation at Support

The 4-hour chart shows that the euro/dollar is facing bearish pressure