What's Next For The Dollar, Gold And Silver?

We have an interesting situation in the market as the strength of inversely correlated instrument didn’t push the other asset price down. Such things happen, and I showed you in the past that the correlation itself is not a dogma. The market flows are driven by investors’ sentiment, which in turn is based on subjective judging.

Let’s see the updated charts below, and the US dollar index (DXY) will be the first.

Dollar

The votes under my previous post about the next move for DXY were split evenly between “break up” and “another drop” options. It’s quite a natural outcome as we never know for sure if a breakout would happen or not. The extreme bullish divergence on the daily RSI finally enforced the price to break up the red resistance.

I labeled that whole move up as the first AB segment. DXY reached the top at 93.7 and then retraced in a pullback to the broken resistance. This is classic price action. Now it is an accurate guess if that was enough, or we will see another leg down within a larger consolidation highlighted with an orange ellipse. The next CD segment to the upside is pending. It could hit the 94.6 notch within a move up equal to the AB segment. This target remains within the price range of the earlier target on the daily chart located on the upside of the downtrend channel at 95.

At the opening of this post, I was talking about this situation that the DXY’s breakup didn’t shake the metals much as they remain at the same level. Let’s see if the further growth of the dollar index would impact them.

Do you agree that the US dollar index will reach 94.6 soon?

View Results

Loading ... Loading ...

The daily gold chart continues the update.

Dollar - Gold

I switched back to the daily time frame as the last update was based on the 4-hour chart for educational purpose. The main reason was to highlight the RSI position on the daily chart as this simple yet useful indicator stubbornly keeps its head above the “waterline.” This supports the primary idea of a triangular consolidation, which was almost invalidated last Tuesday as price sank in the $1907 area, which was terrifyingly close to the bearish trigger of $1903.

But the worst didn’t happen, and the price bounced back to the upside as the triangle’s resistance at $1960 even was penetrated when the price hit the $1967 last Thursday. Was it a breakup? It is quite possible, but we should wait for more evident price strength. The current return into the triangle could be just a consolidation, which is visible on the hourly time frame.

The game now is within $1907 and $1967 range; the latter should be broken to confirm the breakout. The next trigger is $1992 – the earlier peak.

I eliminated the red path as the RSI keeps bullish. The gold is like a rocket at the start now. The countdown has begun.

The majority of you voted for the triangular scenario, so this time there is no need to vote as all eyes on that move now.

The next is the silver daily chart.

Dollar - Silver

I dropped the original idea of the complex correction within a box type range for silver posted earlier. There are several reasons for that. Firstly, gold’s contracting structure offers support for silver and narrows the time provided for a consolidation. The other reason was the limited weakness appeared on the chart last time as RSI keeps bullish here as well. I added the gray dashed mid-channel to the blue uptrend. We can see that the price hovers around that trigger line, confirming the RSI “waterline.”

The price dropped to $25.84 last Tuesday and quickly bounced back to the upside, above the mid-channel. The RSI didn’t break below the crucial 50 level. This created another trough, and we can build the trendline support through two contact points on the downside. The same drawing we can add on the opposite side, and this will shape the Pennant pattern (orange converging trendlines). This will extend the target area.

The first target is located on the upside of the trend at $32.5; it’s a half dollar higher than before as we move to the right on the chart, and so does the contact point on the trendline. The Pennant’s target is located at the distance of the so-called “mast” – the move preceding the Pennant. The price would hit the $35.9 then.

Do you see the Pennant pattern for silver?

View Results

Loading ... Loading ...

Intelligent trades!

Aibek Burabayev
INO.com Contributor, Metals

Disclosure: This contributor has no positions in any stocks mentioned in this article. This article is the opinion of the contributor themselves. The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. This contributor is not receiving compensation (other than from INO.com) for their opinion.

6 thoughts on “What's Next For The Dollar, Gold And Silver?

  1. Sir at one place you are targeting dollar index inching towards 94and above and simultaneously forecsting silver above 35$.It is inconsistent. Then my fears that silver is in the hands of those behaving irrational.Such irrationality arises when strong bull or bears have upper hand and such behaviour will not be unexpected if one can judge the federal reserve actions taken previously.

    1. Dear Mr.Bansal, Sir, in the very first passage I’ve mentioned that such miscorrelation happens and you could see it in my January post at the following link https://www.ino.com/blog/2020/01/visualizing-correlation-gold-vs-other-instruments/
      I also shared my concerns and the worst thing is that we can’t foresee for how long it could emerge. It could be a rebalancing of portfolio when someone cashes out (rusk-off) and buys some precious metals (also risk-off) in case of turbulence not to sit just on cash. Best regards, Aibek

Leave a Reply

Your email address will not be published. Required fields are marked *