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Trading Forecast for DXY, EUR/USD, Gold; Forceful Reversals Abound

Trading Forecast for DXY, EUR/USD, Gold; Forceful Reversals Abound

2018-01-26 12:01:00
Paul Robinson, Currency Strategist

The US Dollar Index (DXY) had an extremely volatile day around support, hinting at a possible reversal. Several USD-pairs put in bearish reversal days, but need to start following through soon if valid. Gold, of course, wasn’t left unscathed, outlook in limbo.

Technical Highlights:

  • US Dollar Index (DXY) reverses from 2010 high
  • EUR/USD, GBP/USD, AUD/USD, NZD/USD all posted nasty reversal bars
  • Gold, silver both felt the smashing impact of the dollar

For longer-term technical and fundamental analysis, and to view DailyFX analysts’ top trading ideas for 2018, check out the DailyFX Trading Guides page.

US Dollar Index (DXY) reverses from 2010 high

The US Dollar Index (DXY) plunge was halted yesterday, with the low coming just under the 2010 high of 88.76. The resulting candlestick was a ‘long-legged doji’, which is marked by a very large trading range to both the top and bottom-side, but the day ends near the unchanged mark. If it can’t hold, look for the 2011 trend-line as the next level of support beneath 88.

For EUR/USD, we have to break out the monthly chart, as the 2008 trend-line comes into focus. We’re there depending on how you draw it, and even if you are more conservative, it arrives not much higher than the high of yesterday’s key-reversal bar. A material decline could be nearing.

Chart 1 – EUR/USD

eur/usd daily price chart

GBP/USD also put in a monster reversal, which shouldn’t come as a surprise given its massive run-up recently. Today it is rallying higher, but as long as it stays below yesterday’s high of 14344 on a closing basis, look for it to weaken a bit from here.

AUD/USD and NZD/USD both put in key reversals at major resistance. The former has a resistance zone from here up to around 8162, but watch and see if yesterday’s high at 8119 can’t hold in place. Kiwi put in back-to-back key-reversal bars at trend-line resistance from 2014 and a price zone extending back to late-2016. There is an uptrend line it is trying to hold; the approach on this end is to wait for that to break before getting too aggressive on shorts.

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Chart 2 – NZD/USD: Daily

nzd/usd daily price chart

USD/JPY found buyers around the mid-108 mark, but has quickly found sellers again. Watching to see if yesterday’s reversal can’t hold, and if it doesn’t there is a long-term trend-line (starts in 2012) just below the 108-level.

We also looked at USD/CAD, USD/MXN, USD/ZAR, and a few cross-rates…

Gold, silver both felt the smashing impact of the dollar

Precious metals experienced a wild turnabout yesterday, which brings the surge from December into question. But as long as gold holds the recently broken 2013 trend-line and trend support rising up from the December low (both in the low-1340s), it will remain supported. A break below will be needed to shift focus.

Silver is holding a support zone in the 17.20/40s and trend-line off the December low. That will need to hold to keep the outlook constructive.

Chart 3 – Gold: Daily

gold daily price chart

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---Written by Paul Robinson, Market Analyst

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