Rising USDX Means Gold Investors Should Care

For more context, I also wrote on March 10:

Let’s take a look at the current situation: the previous drop lasted 200 trade days and there were 41 to 42 trading days between the final bottom of the USDX and the short-term reversals of gold and USDX. Comparing this to the final USDX bottom, we get 7 to 8 trading days.

Applying the above percentages to the duration of the most recent medium-term decline in the USD index provides us with the following:

  • 18.02% – 19.79% x 200 trading days = ~ 36 – ~ 40 trading days
  • 3.53% – 5.65% x 200 trading days = ~ 7 – ~ 11 trading days

The above estimate of around 36-40 trading days almost perfectly matches the current 41-42 days delay, and the estimate of around 7-11 trading days almost perfectly matches the current 7-8 trading day delay. trading days.

In other words, the analogy to the 2018 performance doesn’t just remain intact – it actually perfectly confirms the validity of the current corrective recovery. Again, this is most likely a pullback, not a big trend reversal.

Likewise, a potentially bearish trend that I have watched – where the price action of the USD index from July to October 2020 mirrored that of the price from December 2020 to February / March 2021 – has officially been broken . With the mid-term breakout of the USD index prevailing over the former, the potentially bearish pattern has been invalidated and the USD index is likely to continue its ascent.

But to what end?

Well if we look back to 2020 the USD index has attempted to regain its previous highs. But in the absence of upward momentum, failure was followed by a sharp downward movement. Today, however, the USD index broke past its previous highs and the greenback verified the breakout by consolidating, retreating to previous lows and rising again. Now, the USD index is visibly above its previous highs .

Taken together and given the size of the 2017-18 recovery , ~ 94.5 is probably the first stop for the USD index. And in the coming months, the USDX will likely break above 100 at some point in the medium to long term.

In conclusion, the USD index has moved from the challenge stage to the crowd conquest stage. And with the momentum building up and the adrenaline rush, it’s only a matter of time before the USD Index catches another hay farmer. Additionally, given the negative correlation of precious metals to the US dollar – combined with the fact that techniques, fundamentals and sentiment now overlap with the greenback – an uplift could leave gold, silver and mining stocks battered. and bruised. However, after a difficult period of soul searching, precious metals will once again return to the heavyweight championship. Or, if you want to put it in more technical terms, gold, silver and miners are likely to start a massive rally, but only after visibly declining first.

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Przemyslaw Radomski, CFA
Founder, editor-in-chief
Sunshine Profits: An Effective Investment Through Diligence and Care

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All the above testing, research and information represents the analysis and opinions of the associates of Przemyslaw Radomski, CFA and Sunshine Profits only. As such, it may prove to be false and be subject to change without notice. Opinions and analyzes are based on data available to the authors of the respective trials at the time of writing. Although the information provided above is based on careful research and sources believed to be accurate, Przemyslaw Radomski, CFA and its associates do not warrant the accuracy or completeness of any data or information provided. The opinions published above do not constitute an offer or a recommendation to buy or sell any securities. Mr. Radomski is not a registered securities advisor. By reading Przemyslaw Radomski’s, CFA declares that you fully accept that it will not be held responsible for any decisions you make regarding the information provided in these reports. Investing, trading and speculating in any financial market can involve a high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits employees and affiliates as well as their family members may have a short or long position in any stock, including those mentioned in any of the reports or trials, and may make purchases and / or additional sales of these titles without notice.

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