The American dollar continued to lose ground against gold during yesterday's session as worries over political turmoil in Ukraine and weaker than expected economic data out of the United States increased investors' appetite for the shiny metal. The XAU/USD pair managed to break through the 1337 resistance level after the Conference Board’s consumer confidence index came out at 78.1, down from the previous month's revised 79.4 and below expectations for a reading of 80.2.
Although I think trading above the 1337 level is positive for gold, diminishing momentum is certainly something to watch, especially when there is a divergence between RSI and price action on the 4 hour time frame. Another factor which makes me think that the gains will be limited is the location of the Ichimoku clouds on the weekly chart. Technically speaking, the thicker the Ichimoku cloud, the less likely it is that prices will manage a sustained break through it.
The bottom of the Ichimoku cloud currently sits at 1360 so if the bulls intend to charge, a close above the 1360 level would be necessary to gain enough traction to tackle the 1376 resistance level. From an intra-day perspective, also bear in mind that there will be hurdles in the way such as 1346 and 1355. If the bears successfully defend the 1346 level and the XAU/USD pair turns south, expect to see support at 1328.50 and 1320. Once the bears clear 1320, they will be aiming for 1307.
