Gold gave up some of its recent gains against the American dollar during yesterday's session as investors continued to take profit off the table. The XAU/USD pair had extended its gains and jumped to a three-week high on Tuesday after the bulls managed to break through the 1326 resistance level.
The delayed September U.S. nonfarm payrolls report was a disappointment to the markets and now people believe that the Federal Reserve will keep its quantitative easing in place longer than what they thought just a month ago. Fed's willingness to maintain its massive stimulus and the weakness in the dollar will probably be supportive for the precious metal in the near term. If the bulls are planning to shatter the first critical barrier at 1345 and push prices higher, this might be a good opportunity because the Ichimoku cloud (which represents the resistance in our case) on the daily chart is relatively thin.
Technically, thickness of the cloud is important because the thicker the cloud, the less likely it is that prices will manage a sustained break through it. From an intra-day perspective, I think the key levels to pay attention will be 1345 (a former support/resistance) and 1326 (which happens to be the Fibonacci 23.6 based on the bearish run from 1795.75 to 1180.21). The bulls will need to push the pair above the 1345 in order to test the next barrier located at 1354.
A close above that level would make me think that the bulls are heading towards 1366. However, if the bears take the reins and pull prices below the 1326 level, expect to see some support at 1311 and 1302/4. Today sees release of closely watched economic reports from the United States such as trade balance, new home sales and flash manufacturing PMI.