The XAU/USD (Gold vs. the American dollar) pair settled lower Wednesday, pulling back after sizable gains in the previous sessions, as better-than-estimated U.S. home sales and durable goods data increased demand for the greenback ahead of today’s GDP and unemployment claims reports. Data released by the National Association of Realtors showed the index of pending home sales increased 4.5% to 105.9 in January from a downwardly revised 101.3 in December. This is the highest reading since April 2010. Global equity markets were relieved after Italy successfully auctioned all €6.5 billion of medium and longer-dated government bonds. It appears that a stronger dollar and sharp climb in equities lured some investors away from the shiny metal.
The XAU/USD is currently trading at 1598.25 after finding support at the Kijun-Sen line (twenty six-day moving average, green line). Prices are moving inside the Ichimoku cloud on the 4-hour time frame, suggesting that there is an ongoing battle between the bulls and bears and the direction is not clear.
We have a bullish Tenkan-Sen (nine-period moving average, red line) - Kijun-Sen (twenty six-day moving average, green line) cross on the 4-hour chart but the bulls will need to increase buying pressure and break above the 1604 level in order to gain some momentum. If that is the case, I will be looking for 1618 and 1626. A close above 1626 would indicate that the bulls will be targeting the 1640 level next. However, if the bears take over and prices start to fall, expect to see some support at 1587, 1580 and 1574.
