Gold edged higher on Thursday, recovering a portion of the previous day’s losses, after the Bank of England cut interest rates to record lows and announced a stimulus program to support the country’s economy. The XAU/USD pair initially headed lower after the support at $1356 gave way, trading as low as $1349.06 an ounce, but ultimately reversed its course as buying interest continued to emerge on dips. Gold prices were little changed in Asian trade, ahead of U.S. employment data that may help determine whether the Federal Reserve could raise interest rates as early as September. The weak second quarter GDP report raised some doubts over the health of the world's largest economy.
From a technical point of view, the recent leg up should remain intact as long as the market can hold above the Ichimoku cloud on the 4-hour time frame. Trading above the Ichimoku clouds on the weekly and daily charts suggest that there is more strength and volume behind the bulls. If the bulls dominate the market and push prices convincingly above the 1367.50-1364 area, then XAU/USD may proceed to the next significant barrier located in 1375/0. Once beyond 1375 there is little to slow the market down until 1383.
To the downside, keep an eye on the 1357/6 zone where the Tenkan-Sen (nine-period moving average, red line) and the Kijun-Sen (twenty six-period moving average, green line) lines converge on the 4-hour chart. The bears have to capture this region in order to make an assault on 1346/4. If the bears take the reins and the XAU/USD pair drops through 1344 level, then I wouldn't eliminate the possibility of a further pull back towards the 1238/4 zone occupied by the 4-hourly cloud.
