The U.S. Dollar Index (DXY) is undergoing a thorough test of the big breakout level from last week; needs to hold onto it on a daily basis or else risk of a decline will grow quickly. The Euro holds the key here as the primary driver of the USD index, it’s pressing into resistance right now. GBPUSD is at a spot on the chart that may see it accelerate higher or turn back lower. Gold has been bouncing but still remains vulnerable to selling.
Technical Highlights:
- DXY breakout being put to a significant test today
- EURUSD and GBPUSD rallying into resistance
- Gold price in a state of limbo here
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DXY breakout being put to a significant test today
The US Dollar Index (DXY) broke out strongly last week, but with the past few days of retreat we are seeing that breakout come under fire. The DXY is finding itself dipping a bit below support but as long as a daily close is above then the breakout spot around 9771 it remains valid. A drop back down into the wedge formation will shift this bias towards seeing further weakness.
US Dollar Index (DXY) Daily Chart (testing big support)
Find out where our analysts see USD heading in the coming weeks based on both fundamental and technical factors – Q2 USD Forecast
EURUSD and GBPUSD rallying into resistance
EURUSD is the big driver here of the DXY and on that it is giving resistance a real run for its money here. A reversal back lower will keep pressure on, but a close above 11200 will increase the likelihood of seeing the March trend-line tested; this may be an even more ideal spot to short given the pattern of mini-runs off the lows failing in recent months.
EURUSD Daily Chart (watch response at resistance)
GBPUSD broke down out of a descending wedge formation, but with general USD weakness we are seeing Cable try and take back the breakdown/200-day MA combo level at 12960. This also has top-side trend-line from the wedge in play. A turn down here is required to keep the flow towards seeing the 12700s soon.
A close above the wedge line will bring into play the notion of a false breakdown, previously, and have GBPUSD trading above all near-term resistance. This could catapult price higher with the market then caught leaning the wrong way.
GBPUSD Daily Chart (running into resistance)
Gold price in a state of limbo here
As per usual, the emphasis on this end is on gold’s price action by itself, and not so much what the Dollar is doing. Gold is still acting sluggish within a generally weak trend off the February high. It will require a break above the trend-line off that high to turn the picture more constructive. However, it is hard to be bearish here with the trend-line from August providing a fair amount of support. Gold is a tough proposition at the moment for either side of the tape.
Find out where our analysts see Gold heading in the coming weeks based on both fundamental and technical factors – Q2 Gold Forecast
Gold Daily Chart (weak trend but support below)
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---Written by Paul Robinson, Market Analyst
You can follow Paul on Twitter at @PaulRobinsonFX
