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As we’ve been discussing for the past week, the dollar looks vulnerable to trading lower, and with the DXY teetering on its final thread of support next week may bring another downdraft. EUR/USD could be headed for 11900+ soon if it can hurdle resistance, while USD/CAD could head towards a big test of confluent support. Gold will benefit with the help of a generally weaker USD, eyeing 1220s or better, but prefer to express bullish USD bets via currencies.

Technical Highlights:

  • DXY on the verge of a breaking support
  • EUR/USD could be headed to the 11900s very soon
  • USD/CAD trading towards test of big support zone
  • Gold price to benefit from USD weakness, 1220s+

To check out our intermediate-term fundamental and technical outlook on major markets and currencies, see the DailyFX Trading Forecasts.

DXY on the verge of breaking support

We’ve been watching the US Dollar Index (DXY) lately with a close eye on several similarly angled trend-lines running through roughly the same area, along with the August 28 swing-low just beneath the cluster.

We are seeing the index flirt with a breakdown today and extension of another leg off last months high. A confirmed break (i.e. – daily close) below 9443 should be enough to keep the dollar rolling downhill next week.

US Dollar Index (DXY) 4-hr Chart (Support levels under fire)

USD index (DXY) 4-hr chart, support levels at risk of being broken

EUR/USD could be headed to the 11900s very soon

Flipping the script on the dollar, EUR/USD is testing resistance and trying to clear above 11733 (9443 equivalent for DXY). On clearance look for momentum to pick up next week, with potential to extend beyond the June high into the 11900s.

To see what’s been driving the Dollar and Euro, check out the Quarterly Reports

EUR/USD Daily Chart (On verge of extending leg higher)

EUR/USD daily chart, on verge of extending leg higher

USD/CAD trading towards test of big support zone

USD/CAD weakness has it running lower towards a big support zone in the vicinity of 12930/12860. There is still some room to go before arriving there, but it will be an important spot to hold given all the technical events; 2012 slope, August low, top of 2016 t-line, and the 200-day MA. A hold offers ‘would-be’ longs a line-in-the-sand, while a break could accelerate the trend off the summer highs.

USD/CAD Daily Chart (Confluent support under siege)

usd/cad daily chart, confluent suppport under siege

Gold price to benefit from USD weakness, 1220s+

Gold is working its way higher and with the dollar on the cusp of breaking down it may get the nudge needed to trade above 1214 to the April trend-line, currently in the 1220s. Playing a dollar move is more ideal in the FX market than in precious metals, but nevertheless a solid move in the dollar is likely to give gold a boost. Silver remains the laggard and is being avoided from the long-side for now.

Gold Daily Chart (targeting April t-line, 1220s)

gold daily chart, targeting April t-line, 1220s

To find out what’s been driving gold, check out the Quarterly Gold Report

Resources for Index & Commodity Traders

Whether you are a new or an experienced trader, DailyFX has several resources available to help you; indicator for tracking trader sentiment, quarterly trading forecasts, analytical and educational webinars held daily, trading guides to help you improve trading performance, and one specifically for those who are new to forex.

---Written by Paul Robinson, Market Analyst

You can follow Paul on Twitter at @PaulRobinsonFX