Gold prices ended Tuesday’s session up 0.4%, marking the second consecutive rise, as a softer dollar helped prices regain their footing. The XAU/USD pair encountered resistance in 1075.50 – 1072.50 and retreated to the 1066/3 region, though managed to hold above there after the ISM’s manufacturing purchasing managers index came in worse than expected with a print of 48.6. The dollar’s rally based on the conviction that the U.S. economy will strengthen enough for the Fed to begin raising interest rates has been weighing on the precious metal for weeks.

From a technical standpoint, the upward potential is likely to be limited by the resistance at 1081.55 which happens to be the top of the Ichimoku cloud on the 4-hour time frame. XAU/USD is currently trading above Ichimoku clouds on the the 1-hour and 30-minute charts, plus we have positively aligned Tenkan-Sen (nine-period moving average, red line) and Kijun-Sen (twenty six-period moving average, green line) lines. However, in order to reach 1081.55, the bulls will have to push through 1075.50 – 1072.50 first. Only a close above the 1081.55 could pave the way towards the 1087 resistance.

As mentioned earlier, the 1066/3 support is the key area for the bears to conquer if they intend to increase the downward pressure. In that case, I think the market will be aiming for the next support levels at 1058 and 1054. If 1054 is breached, we will probably see prices fall to the 1045 area. Until the key levels are broken, it is quite likely we will chop around as major players await U.S. data (and the outcome of the ECB meeting).