Gold gained some ground against the American dollar as intensifying worries about a possible economic catastrophe in Cyprus increased precious metal's safe haven appeal. The XAU/USD pair has been resilient to the bears' attacks over the last few weeks. Uncertainties like political turmoil in Italy, Cyprus bailout negotiations and the U.S. budget woes have been favoring the gold bulls recently. The pair has been printing higher lows since it managed to break out of the 1564-1585 consolidation zone and today we are testing the 1616 resistance level which has been a cap on prices for the last four days. The 4-hour chart suggests that there is more strength and volume behind the bulls at the moment. We have a bullish Tenkan-sen (nine-period moving average, red line) - Kijun-sen (twenty six-day moving average, green line) cross and the pair is moving above the Ichimoku cloud. Today the key levels to watch will be 1616 and 1608.50. If the bulls win the battle and climb above the 1616 level, I will be looking for 1620 and 1625.
However, I expect to see heavy resistance between the 1625 and 1635 zone. To the downside, the bears will have to push the pair below the 1608.50 support level which converges with the Tenkan-sen line on the 4-hour chart in order to gain some momentum. If we break below this level, prices may pull back to the bottom of the ascending channel which currently sits at 1603. If 1603 gives way, the next challenge will be waiting the bears at 1598/7. Since today's economic calendar is light, USD/JPY and the major equity markets will be on my radar.
