The XAU/USD pair was mostly flat last week and the trend didn't change on Monday. Although trading activity was subdued, with the financial markets in the United States and London closed for public holidays, residing below the 1307 level might be an important sign of weakness. The Ichimoku clouds often act as strong resistance (or support depending on its location) and when the cloud coincides with a former support/resistance level, they can be quite powerful.
The thickness of the Ichimoku cloud is important as well because the thicker the cloud, the less likely it is that prices will manage a sustained break through it. The thinner the Ichimoku cloud, a break through has a better chance. With that in mind, it makes more sense to wait until we break out of this tight market. I think the 1307 and 1277 levels will be crucial in the near term. Despite the Ukrainian situation continues to offer some background support, stability in stock markets and growing conviction that the dollar is likely to strengthen are soaring the demand for disaster insurance.
The economic calendar does not see a lot of major items in this week but the eyes will be on the durable goods orders and consumer confidence data today. The highlight of the week will come on Thursday when the Commerce Department releases its GDP report. The first hurdle gold needs to jump is located around the 1300 level which coincides with the descending trend line. If the XAU/USD pair successfully breaks through, it is technically possible to see a short-term bullish continuation targeting the 1307 level. A close above 1307 would suggest that the pair may extend its gains and target the 1312/13 resistance next. On the other hand, breaking below the 1287/3 support zone means the market will probably head back to the 1277 level.
