Gold prices ended Tuesday’s session down $12.68, pressured by continued risk appetite across markets. Technical selling was also behind gold's 1% drop yesterday. The XAU/USD pair extended its losses as expected and tested the $1261 level after prices broke below the $1270.60-1268.50 zone.
The area at around 1261 has provided some support so far, however, trading below the 4-hourly Ichimoku cloud, along with yesterday's bearish candle, which engulfed the previous candle, suggests that the selling pressure will persist. Negative Tenkan-sen (nine-period moving average, red line) - Kijun-sen (twenty six-period moving average, green line) cross also supports this theory. The daily Kijun-sen stands at 1261 as well, so the market has to get down below there in order to continue to the downside and test 1257/5. If this support is broken, then 1250/48 will be the next port of call.
Similarly, the daily Tenkan-sen converges with the 1277.35-1276 resistance. The bulls will need to push prices beyond this area so that they can make an assault on the 1284-1283.40 area (the top of the Ichimoku cloud on the H4 chart). A breach of this barrier could push XAU/USD towards 1289/7.
