The XAU/USD pair fell for the week and settled at $1315.54 an ounce on Friday as investors decided to liquidate some of their long positions and turn to the relative safety of the U.S. dollar. The pair traded as low as 1306.05 during Friday's session after data released from the Institute for Supply Management showed that the index of national manufacturing activity climbed to 56.4 from 56.2 a month earlier.
In my previous analysis, I had pointed out that the bears were going to target the 1306.68 level once they dragged prices below the Thursday's low of 1319.03. I think this level will have an important role this week because the Kijun-sen line (twenty six-day moving average, green line) currently resides there. In addition, the %50 retracement levels based on the bullish run from 1180.21 to 1433.70 and from 1251.60 to 1361.76 converge at the same level. However, the XAU/USD pair is trading below the Ichimoku clouds on the daily time frame and that indicates the bulls are not strong enough to dominate the market.
Based on the technical levels, I think this week's trading range will be between 1335.92 and 1293. To the upside, there will be hurdles in the way such as 1321 and 1326. If the bulls build some steam and break through, I think it would be technically possible to see pair revisiting the 1335.92 - 1339.96 area which defines the borders of the Ichimoku cloud on the 4-hour chart. A close below 1306 would suggest that a bullish run will have to wait a little longer as the bears will be aiming for 1293 next. As usual in the first week of the month -aside from the central banks' meetings- market participants will have plenty of economic data to digest, including ISM services activity survey, U.S. GDP, non-farm payrolls and unemployment rate.
