The USD demand is rather a local technical correction after an aggressive sell-off seen last week, then a sign of an underlying demand coming back. The dollar’s fundamentals still point to the downside, as the U.S. faces the so-called double deficit, as well as the threat of narrowing the interest rate differential with other global central banks embarking on tightening.
Therefore, the current correction in gold prices could reverse as soon as the dollar bears return to the market and send the USD index to three-year lows. The immediate resistance lies at $1,331; a break above will open the way to the next target at $1,339. The key level to the downside remains at $1,300, while the short-term support is expected in the $1,322 area.