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Talking Points

  • USDOLLAR Channel breakout in question
  • Gold in consolidation below key near-term resistance
  • Updated levels and invalidation points

USDOLLAR Daily Chart

USDOLLAR, Gold Setups Target Key Resistance- Breakouts Pending

Chart Created Using FXCM Marketscope 2.0

Technical Outlook

  • USDOLLAR testing key resistance range 10,488/95- bearish invalidation
  • Topside breach targets objectives at 10,517/24, 10,562/71, 10,618
  • Interim support 10,444 (May Open / May 2nd Close)
  • Break targets 10,401, 10,365/79- bullish invalidation
  • Daily RSI resistance trigger-break- bullish

Notes: The USDOLLAR looks vulnerable near-term below key resistance at 10,488/95 but we are working under the assumption that a significant low may have been put in this month. We highlighted this region back on March 20th, when the index mounted an impressive 2-day rally into fresh monthly highs off this mark. This range is defined by multiple key Fibonacci ratios as well as the 50-day moving average and the May opening range high and we will use this threshold to validate the break of channel resistance dating back to the 2014 high. Longs into/below this level are at risk in the near-term with a breach/close above offering further conviction on our directional bias.

Bottom line: the greenback looks constructive and with cyclical trends further supporting our broader outlook for a strong May performance. Look for a low into the end of the week/early next week to buy into with breach of the May opening range targeting a late month high into subsequent resistance objectives.

Gold Daily Chart

USDOLLAR, Gold Setups Target Key Resistance- Breakouts Pending

Technical Outlook

  • Gold consolidation break-out pending below major resistance confluence
  • key resistance $1307/10- near-term bearish invalidation
  • Breach shifts focus back to $1327/34, $1348/50 & $1366
  • Interim support $1291 (200DMA), TL support & $1260/70- bullish invalidation
  • Break below opens up targets at $1216/24 & $1178/80
  • Daily RSI break-out trigger pending

Notes: Similar to the USDOLLAR trade, gold seems poised for an assertive move heading into the close of May trade as the precious metal continues to bottleneck into the apex of a multi-month consolidation pattern. Our strict focus is against key resistance at $1307/10- a region defined by the 61.8% retracement of the April decline, the 100% extension off the April low, triangle/trendline resistance dating back to the 2012 high, and the 50-day moving average. Interim support has been provided by the 100-day moving average over the past few sessions and a break below this looks to challenge trendline support dating back to the April low. The $1260/70 key support rang remains pivotal with a weekly close below needed to validate the resumption of the broader downtrend.

Note that the biggest risk to the technical outlook here is a more pronounced sell-off in risk assets. Should the equity declines intensify, look for the downside to remain limited with a break above $1310 shifting our medium-term focus back to the resistance-zone noted last month at $1327/34. Bottom line: stay nimble between trendline support and $1310 with a likely breakout over the near-term likely to further validate our directional bias. Follow the progress of these trade setups and more throughout the week with DailyFX on Demand.

Other Setups in Play:

---Written by Michael Boutros, Currency Strategist with DailyFX

For updates on this scalp and more setups follow him on Twitter @MBForex

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Interested in learning about Fibonacci? Watch this Video