The XAU/USD pair had a bearish day after the last minute deal to avoid a major crisis in Cyprus dulled the precious metal’s safe-haven appeal. The pair traded as low as 1589.87 before recovering to 1607. Prices have been slightly bearish during the Asian session and now we are testing the support/resistance level at 1602. Although the initial optimism triggered a sell-off, the pair found strong support just above the Kijun-sen line (on the daily chart).
From a technical point of view, both the daily and 4-hour charts are giving mixed signals at the moment. On the 4-hour time frame, prices manage to hold above the Ichimoku cloud while having a bearish Tenkan-sen (nine-period moving average, red line) - Kijun-sen (twenty six-day moving average, green line) cross and on the daily time frame, prices remain below the Ichimoku clouds while having a bullish Tenkan-sen - Kijun-sen cross. Because of that I think that the XAU/USD pair will consolidate between 1616 and 1585 in the near future.
If the bulls take over and prices start to rise, there will be two major resistance levels which I will be focusing on; 1616 and 1625.64. The bulls have to push the pair above the 1626 level, which converges with the top of the descending channel (the daily chart) in order to change the medium-term trend.
If that happens, I believe 1635 will be reached in a short time. To the downside, I think the 1602-1598 zone will be the first support for the bulls. If we drop below the 1598 level, it is likely that the pair will be testing 1593 (or even 1585). A close below the 1585 support level could accelerate downward movement.