US Dollar bounces at nine-month support line. Gold price Elliott wave outlook is towards lower levels on the inability to break through resistance.
The video above is a recording of a US Opening Bell webinar from June 17, 2019. We focused on the Elliott wave patterns for key markets such as EURUSD, DXY, GBPUSD, USDJPY, USDCAD, gold, silver, and crude oil.
US Dollar Pattern Looks like a Top is in, but has not broken support
The US Dollar has made little progress through the current calendar year. Looking backward, the impulsive bear wave in 2017 suggests a partial correction to the upside in a three-wave structure is highly likely. We can count the minimum waves in place for an (A)-(B)-(C) Elliott wave zigzag pattern beginning in February 2018. This proposed zigzag has corrected a Fibonacci 61.8% of the 2017 down trend. If the top is in, then a break of the blue trend line will be a large signal towards lower pricing.
After a break of the trend line, several wave counts suggest continued weakness to 92-94. From there, the wave counts diverge with some suggesting a run at new highs while others hint towards deeper weakness into the low 80’s. We will watch the structure of any correction to tip our hands and provide clues as to which is the higher probability path.
Gold prices repel at resistance
Last week, discussed how gold prices challenge resistance and that if $1365 were to hold, the door is open for a retest below $1265.
On Friday, gold price did challenge the high making it to $1358 before retreating. Last week’s challenge came with divergence on the Relative Strength Index oscillator. These are bearish symptoms for gold and suggests Friday’s high at $1358 might be wave ‘D’ of an Elliott wave triangle pattern that began in July 2016. If correct, then gold prices are poised to fall below $1265 in the ‘E’ leg, or final leg of the triangle.
An important point to keep in mind is that a correction would be the final leg of a multi-year triangle. In other words, this is a BIG pattern. Therefore, emotions tend to run high as traders try to hold on to old and tiring trends. Keep your focus on the larger pattern at play as the better trading opportunities with better risk to reward ratios appear once the large patterns end.
Bottom line, so long as gold prices remain below $1365, anticipate a retest and temporary break below $1265 to finalize the 3-year triangle pattern. If gold breaks above $1365, then we need to reconsider the triangle pattern already over and that gold may be advancing deep into the $1400’s and possibly $1500’s.
Read more: top gold trading strategies and tips
Elliott Wave Theory FAQ
How does Elliott Wave theory work?
Elliott Wave theory is a trading study that identifies the highs and lows of price movements on charts via wave patterns. Traders analyze the waves for 5-wave moves and 3-wave corrections to determine where the market is at within the larger pattern. Additionally, the theory maintains three rules and several guidelines on the depth of the waves related to one another. Therefore, it is common to use Fibonacci with Elliott Wave analysis. We cover these topics in our beginners and advanced Elliott Wave trading guides.
After reviewing the guides above, be sure to follow future Elliott Wave articles to see Elliott Wave Theory in action.
---Written by Jeremy Wagner, CEWA-M
Jeremy Wagner is a Certified Elliott Wave Analyst with a Master’s designation. Jeremy provides Elliott Wave analysis on key markets as well as Elliott Wave educational resources. Read more of Jeremy’s Elliott Wave reports via his bio page.
Join Jeremy in his live US Opening Bell webinar where these markets and more are discussed through Elliott wave theory.
Follow Jeremy on Twitter at @JWagnerFXTrader .