Gold prices continued to decline yesterday and touched the middle line of a giant consolidation area which prices have been trapped for several months. After falling 4 sessions in a row, it appears that the XAU/USD pair found some support at this critical level of 1652.
The 4-hour and 1-hour charts suggest the pair is trying to form a bottom formation but price action during the Asian session today is not so strong. I think the key levels to watch will be 1662 and 1652 before making any decision. However, we have several different catalysts that could come about. Obviously, the results of the Federal Open Market Committee meeting, ADP private payroll data and GDP report have huge potential to change the direction. In the short term, I expect a consolidation between 1652 and 1666. On the other hand, if prices break below the 1652 with strength, we could see the XAU/USD pair sink deeper with support at 1642 and 1635 being important areas to watch. In order to gain some traction the bulls will have to break through the 1662-1666 zone first. If the bulls manage to break and hold above 1666, there is a possibility that we could revisit the 1674 resistance which is the bottom of the Ichimoku cloud on the 4-hour time frame. Beyond 1674, expect to see more resistance at 1685 and 1695.
