The market started the week on the back foot, erasing a portion of the gains made last week, as the bull's inability to pass through the 1087 resistance triggered some profit taking. Not surprisingly, XAU/USD extended its losses after the supports at 1081.55 and 1073 were broken and consequently returned to the 1066 area which is occupied by the Ichimoku clouds on the 4-hour chart. These clouds not only identify the trend but also define support and resistance zones. Technically, the thickness of the cloud is relevant, as it is more difficult for prices to break through a thick cloud than a thin cloud.
With the help of the 1066 support the market is trying to hold above the cloud in Asian trade. If the bulls overtake the bears and push through 1073, then it is likely that the pair will test 1077.40-1077.06 and 1081.55. Beyond that, the next obvious resistance level stands at 1087. Only a sustained break above the 1087 level could prolong the bullish momentum and pave the way towards 1098.
On the other hand, if the bears successfully defend the 1073 barrier and increase the downward pressure, XAU/USD will probably pay another visit to the 1066/4 support. Since the bottom of the 4-hourly cloud and the daily Tenkan-Sen line (nine-period moving average, red line) converge in this area, sellers will have to capture this strategic camp in order to test the 1059.75 level. Closing below that would make me think that the next stop will be the 1054/3 support zone.
