As a rule, when the value of the dollar increases relative to other currencies around the world, the price of metals tends to fall in U.S. dollar terms. It is because gold becomes more expensive in other currencies. As the price of any commodity moves higher, there tend to be fewer buyers, in other words, demand recedes. Conversely, as the value of the U.S. dollar moves lower, metals tends to appreciate as it becomes cheaper in other currencies.
Currently as you can see in my previous analysis, the Dollar Index has been declining since March, as more investors head into equities. Since the Tuesday top, we've declined around 7% from the highs, and more than 10-15%+ on large technology names such as Apple and Facebook.
This chart shows a nice formation of a bull flag, and we sit currently at the bottom of the trendline. If we see a solid up day, it would be a good sign to take a long position. This chart also applies to gold. My current targets would be 30, 32, 34 and 36. Personally, I would trim positions accordingly at your profit targets to make a risk-free trade. For shares/equity, I would use price targets, and for options, percentage targets.
Looking to the bear case for metals - if we see a decline in equities, the US Dollar and Dollar Index as a whole would rise, leading to a selloff in metals too.
As always, trade and plan risk accordingly! Stay safe out there! Don't fight the trend or time the top! Good luck with your trading!
Currently as you can see in my previous analysis, the Dollar Index has been declining since March, as more investors head into equities. Since the Tuesday top, we've declined around 7% from the highs, and more than 10-15%+ on large technology names such as Apple and Facebook.
This chart shows a nice formation of a bull flag, and we sit currently at the bottom of the trendline. If we see a solid up day, it would be a good sign to take a long position. This chart also applies to gold. My current targets would be 30, 32, 34 and 36. Personally, I would trim positions accordingly at your profit targets to make a risk-free trade. For shares/equity, I would use price targets, and for options, percentage targets.
Looking to the bear case for metals - if we see a decline in equities, the US Dollar and Dollar Index as a whole would rise, leading to a selloff in metals too.
As always, trade and plan risk accordingly! Stay safe out there! Don't fight the trend or time the top! Good luck with your trading!
Comment:
Well, looks like it dumped pretty hard, straight inverse of my projection. However, the signs of a false breakout were there - low volume, choppy price action and grinding against the lower trendline. We must always account for losses in our plans.