Gold price retraces losses toward $1270 as DXY erases NFP-led gains

New York (Oct 6)  The XAU/USD pair dropped nearly $10 in a matter of minutes following the release of the employment report from the U.S. and refreshed its fresh 2-month low at $1260 before starting to retrace its losses. As of writing, the pair was trading at $1270, up 0.09% on the day.

According to the data released by the U.S. Bureau of Labor Statistics on Friday, total nonfarm employment decreased 33K in September amid a sharp employment decline seen in food services and drinking places, reflecting the negative impact of hurricanes Harvey and Irma. However, despite that contraction, the unemployment rate eased to 4.2%. Moreover, average hourly earnings increased 0.5% on a monthly basis, bringing the annual wage growth up to 2.9%.
•US: Payrolls distorted, but strong wages boosts case for Dec rate hike - ING

The US Dollar Index jumped to its highest level since late July at 94.09 but struggled to stretch its gains further. News of North Korea getting ready to test a ballistic missile capable of reaching the West Coast of the United States hurt the market sentiment and forced investors to take some profit off the table. At the moment, the US Dollar Index is virtually flat on the day at 93.75.
•North Korea is ready to test a missile capable of reaching the U.S. West Coast - Sputnik

Moreover, major equity indexes are pushing lower with the Dow Jones Industrial Average and the S&P 500 losing 0.15% and 0.25% respectively, reflecting a risk-off mood, which helps the safe-haven precious metal gather strength against the buck.

Technical outlook

Although the pair eased slightly below the critical $1262 (200-DMA) handle, this level remains intact as the first support. Below that level, $1251 (Aug. 8 low) and $1243 (Jul. 26 low) could be targeted. On the upside, resistances could be encountered at $1282 (Oct. 4 high), $1295 (20-DMA) and $1300 (psychological level).

FXstreet