Por: DailyForex
Gold has erased its earlier gains and is trading slightly lower in afternoon U.S. trading. XAU/USD initially tried to break out to the upside however, the anticipated resistance in 1264/2 did kick in and capped the market. Consequently, prices headed south to test the support around the 1250 level and bounced back above 1255.
The market is hovering just above the 1255 level at the moment but the short-term charts suggest the upside potential will be limited as long as prices remain below the 4-hourly cloud. Negatively aligned Tenkan-sen (nine-period moving average, red line) and Kijun-sen (twenty six-period moving average, green line) lines also support this theory.
If prices can't hold above the 1255/3 area, then we may pay another visit to 1250-1247.89. A break below 1247.89 could trigger a drop towards 1242. To the upside, keep an eye on the 1260/59 zone, where the Tenkan-sen and the bottom of the cloud converge. If the market recovers and climbs above 1260, then we will probably retest the 1264/2 zone