The XAU/USD pair had an interesting session during the last trading day of the week with the bulls and bears gaining and losing ground almost equally. The non-farm payrolls report released from the Bureau of Labor Statistics showed that the U.S. economy added 236K jobs in February and the unemployment rate fell to 7.7% from 7.9%. The initial market reaction to the U.S. employment numbers was positive for the greenback and triggered a sell-off, causing gold prices to hit the 1561.45 level. However, the XAU/USD pair rebounded sharply and pared nearly the entire decline. I think the fact that the bears failed to gain a significant momentum suggests that the recent consolidation period is not over yet. Although the economic reports released within the last couple of months have been better than expected and fueled speculation that the U.S. Federal Reserve will reconsider its quantitative easing program, we are still far from the central bank's targets. From a technical stand point, the pair will remain bearish as long as prices remain below the Ichimoku cloud on the daily chart.
Also note that the 1625 level is a major resistance level which the bottom of the Ichimoku cloud and the Tenkan-Sen line (nine-period moving average, red line) converge on the weekly chart and I think that we have to pass that strong barrier in order to confirm that the bulls are firmly in control. In the meantime, I will be focusing on the 1587 and 1570 levels for new trading opportunities. A daily close above 1587 may give the bulls the extra power they need to test 1597.77, 1604 and 1625.64. If the bulls encounter heavy resistance and prices reverse, support to the downside will be found at 1564 and 1555.