Weekly Comparison Structure Of The US Dollar Index And Gold

Per reader request, let’s take a quick look at the US Dollar Index and the Gold Market on a 3-year weekly chart basis, noting key Fibonacci levels and possible long-term targets.

Using Classic Technical Methods, we see that Gold is clearly in an uptrend as confirmed by higher highs and higher lows as well as the current structure of the 20 and 50 EMAs both being above the 200 SMA in the ‘most bullish orientation possible.”

Digging a little deeper, we see a possible Elliott Wave count that notes the Wave (1) was a 5-wave fractal affair and the Wave (2) retracement back into confluence support (50 EMA and 38.2% Fibonacci retracement - drawn inverse) was a 3-wave pullback.  This implies that odds favor a 3rd wave yet to come which - if it materializes - would take prices well beyond the $1,000 barrier.

It doesn’t take deep level analysis to assume that if the critical $1,000 resistance barrier is broken, price has a good chance of forming a trend move much higher.

A new momentum high formed in February which hints that higher prices are yet to come from a ‘momentum principle’ standpoint as well.

I’ve also drawn a confluence Fibonacci grid to note key areas of possible support should price turn down unexpectedly from these levels.  The first ‘line of support’ would be the 20 and 50 week EMAs at roughly $900 and $875.  Beneath that we would have loose confluence Fibonacci at the $840 level and then tighter confluence at the $800 level.

Moving from gold, let’s take a quick look at the US Dollar Index weekly chart.

I won’t go into as much detail as above in gold, but notice that the price has entered a possible inflection point (technical node) off the 50% Fibonacci retracement at $80 as well as the price projection target of the bear flag (which I mentioned in yesterday’s “Dollar Index Completes Bear Flag” post).

Being a technical decision node, it might be best to see what happens (who wins the supply/demand battle) off this level and then join the winning side instead of trying to be a hero to anticipate which side will win.  We could get a bounce off this level at least to the $82 area.

Trend-wise, we are in a far weaker position, having broken definitively beneath the 20 and 50 week EMAs along with the 200 week SMA.  Price is now in ‘open air’ to the downside with only Fibonacci retracement support to contain it… and plenty of resistance overhead.

We also may be breaking down out of what appears to be a possible head and shoulders formation.

I don’t like to give long-term targets - I much favor anticipating the ‘next likely swing’ and then moving from there, but it seems very likely that - given price continues lower and breaks the 61.8% retracement, we may see a retest of the $72 level many months from now (looking at the technical structure above).

For those interested specifically in Elliott Wave analysis of these and other markets, consider joining Elliott Wave International which offers a three-times per week updated count of these and other markets.

Let’s continue to keep an eye on the larger picture and watch for key signs of unexpected developments.

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