This cross-chart analysis studies the correlation of Gold spot (XAUUSD) with the Dollar Index (DXY) on a two year span.
We see that since Gold made the 1,366.47 High in January 2018, it declined more aggressively than the equivalent rise on DXY from its 88.25 Low (-15.15% against +9.90% respectively). The cycle's measurements are taken from Gold's 1,122.73 Low in December 2016 and DXY's 103.82 High respectively.
Since Gold made the 1,160.34 Low in August 2018 it has been rising along with DXY against their natural negative correlation (largely affected by the correction on the equity markets). From a technical standpoint this is an attempt to reach price harmonization with DXY around the 0.5000 Fibonacci retracement levels. We see that both are currently around the 8.70% from their respective High (Gold) and Low (DXY), so a technical balance between the two has been accomplished.
This may suggest that we will have from now on the traditional negative correlation between the two and since DXY is on a natural uptrend towards its 103.82 High, we should see Gold reversing soon below 1,200 again as the stock markets stabilize. This indicates that Gold is currently on a low Risk/Reward sell ratio.
Note that this study is based on long term historical regression analysis and is suitable for long term swing traders/ investors.
Thanks for the great analysis. I have this resistance zone for DXY around 98, would be grateful if you could shed a light on this potential resustsvde area.