Gold continued to gain ground against the American dollar during Friday's trading session and settled at $1236.91 an ounce. The XAU/USD pair (Gold vs. the American dollar) seems to be picking up momentum since prices bounced off of the 1182.35 level but of course now the question is how far it will go. Technically speaking, the odds favor the bulls in the short term because prices are moving above the Ichimoku cloud and 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 time frame.
I think that the recent correction will continue towards the 1268 - 1287 zone where the Ichimoku cloud (on the daily time frame) and the top of the descending channel converge. However, there is strong resistance between 1237 and 1240 (Fibonacci 23.6 level based on the bearish run from 1433.70 to 1182.35). Therefore climbing above that area is essential for a bullish continuation.
Failure to break through could bring sellers back to the market. If that is the case, we will probably see prices falling to around 1225 or 1219. Once below that the bears will be aiming for 1213 at least. Looking ahead, the market awaits a flurry of economic data due out this week, but of course the Federal Open Market Committee meeting minutes and Labor Department's employment report will draw more attention as usual. Last year market sentiment was mainly driven by expectations of tapering but this year -if the labor sector data come out consistent with the Fed’s forecasts- the major focus may shift towards inflation prospects.
