Clues From the USD Index

On Monday gold moved a bit higher, but what is the current technical picture of the USD Index?

Technical Picture of the USD Index

In yesterday’s article you could read about the current situation in the yellow metal. But what happened at the same time with the USD Index? What clues about the next moves (both in the case of gold and the U.S. currency) can we read from the charts? I shared my answers to these questions in yesterday’s Quick Gold Alert. Today, I share them with you. Have a nice read.

Clues From the USD Index - Image 1

Let's start this section by recalling the technical situation at the time of the publication of the last Quick Gold Alert:

(…) The first thing that catches the eye on the daily chart is today’s breakout above the 61.8% Fibonacci retracement (based on the entire earlier decline) and the orange resistance line based on the previous peaks.

Although this is a positive sign, we should keep in mind that the entire trading day is still ahead of us and we will only be able to talk about the positive impact of the above-mentioned breakouts if we see a daily close above these levels.

Will this happen?

Clues From the USD Index - Image 2

From the closer perspective, we see that although the USD Index moved higher before the U.S. market open, the indicators did not follow this increase and negative divergences appeared, which suggests that the space for gains may be limited and reversal could be just around the corner – especially if they generate sell signal in the coming day(s).

Looking at the above charts, we see that the situation developed in tune with the above scenario, and the USD Index corrected the earlier upward move, slipping to the previously broken Mar.12 peak.

As you see, this support withstood the selling pressure, which encouraged the bulls to attack and translated into another upward move that took the USD Index not only above the orange resistance line and the previous peaks but also approached it to mid-Feb. peak.

What’s next?

On Friday, the index started a consolidation (marked with orange). Earlier today, the bears showed their claws and pushed it below the lower border of the formation, which increases the probability of further deterioration in the coming day(s).

This scenario is also supported by the sell signals generated by the 4-hour indicators, which means that gold bulls have an additional argument to act and push the price of gold higher.

How low could the USD Index go?

Taking into account the above-mentioned breakout, it seems that the first target for the sellers would be around Mar. 19 and Mar.20 highs (marked with green horizontal lines, which are slightly below the first Fibonacci retracement based on the entire recent upward move).

However, if this support area is broken, the next target for the sellers could be the previously broken orange line based on the mid-Feb. and Mar.1st peaks (seen more clearly on the daily chart) and the 38.2% Fibonacci retracement (marked with the green ellipse on the daily chart).

Summing up, although gold bulls failed to hold the price above the barrier of $2,200, the lower volume that accompanied Friday’s session, today’s green supportive gap and the current situation in the USD Index suggest that another upswing may be just around the corner.

Thank you for reading today’s gold price forecast. The full version of my analysis includes trading details and my premium subscribers are updated regarding the trading details on a daily basis - and as you know, in the case of gold, a lot can change in one day. The regular price of my premium Quick Gold Alerts is just $49/mo. and there’s also a free, 7-day trial, so that you can conveniently check the benefits that my premium subscribers get. I encourage you to subscribe to my Quick Gold Alerts with a free weekly trial today.

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See you tomorrow.

Anna Radomska