Technical Analysis: DXY & Gold update – Continue weakness in the dollar firms the bullish sentiment of Gold
- Gold has snapped out of its 2-month winning streak and it has traded below US$2,000 per ounce.
- Although prices rebounded back above the US$1,900 level, the bearish sentiment may return and test lower support.
- The dollar index remains weak. With the dollar index trading between 93.96-92.54
The dollar index continues to flirt around the region of 161.8% expansion level of wave 1-2. Despite the dollar attempting to re-test the support turned resistance zone, the index fails to clear above 94.00 psychological level. Moreover, the formation of the bearish pennant indicates the dollar index will continue to test lower level at 91.05.
Should the dollar index continue to fall below 92.00 and subsequently 91.05, then the primary phase of wave 3 will be further extended beyond 90.00. Weaken the dollar further.
Figure 2: Gold Monthly chart – ABC zig-zag corrective wave might be an expanded/running flat unless 2127.58 is broken
Gold’s bullish sentiment took us by surprise when the prices of Gold traded beyond US$2,000. Based on our report on 27th July, we expected a small correction upon nearing 2,100 but the correction was deeper than expected. Despite the weekly close above the resistance turned support at US$1921.15, the outlook remains cautionary.
*Should Gold stays elevate above US$1,900, the immediate bullish upside will remain.
Figure 3: Gold daily chart – Immediate wave indicate that wave (3) is not yet completed
The daily chart of Gold has indicated a potential rebound after the bullish hammer formation closes above the 50% and 38.2% Fibonacci retracement level of US$1671-US$2075.47. Despite a sell-off on Friday, the bullish optimism remains as the precious metal is still trending above the 50 and 200-day moving average.
Should there be a continue selling, the next area of rebound will likely be at US$1825.51.
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