The selloff in USD/JPY has pulled the US Dollar Index lower with it. Could this be the year-end trade? Selling US Dollars? Notice in the bottom panel of the chart that the correlation coefficient between Gold and the US Dollar Index. The current reading is -0.92. Readings below -0.80 indicate a strong negative correlation between 2 assets. Therefore, if the strong correlation holds on the daily timeframe, when the DXY moves in one direction, Gold should move in the opposite direction.
If it is the case that the DXY will move lower into year-end, Gold (XAU/USD) could continue with its move higher since testing 1614.95 three times during the autumn. The precious metal has bounced from the lows and retraced to the 200 Day Moving Average and the 38.2% Fibonacci retracement level from the highs of March 8th to the lows of September 28th, near 1789. However, the US Dollar move lower on Tuesday helped push Gold higher, closing up 1.73%.
First resistance in XAU/USD is the December 13th high of 1824.52. Above there, price can move to the 50% retracement level from the previously mentioned timeframe at 1842.71, then previous highs from June 13th at 1879.16.
However, be on alert. If the DXY bounces, support is at the 200 day Moving Average near 1785.65. Below there, price can fall to horizontal support at 1735.21, then again at 1676.90.
If it is the case that the DXY will move lower into year-end, Gold (XAU/USD) could continue with its move higher since testing 1614.95 three times during the autumn. The precious metal has bounced from the lows and retraced to the 200 Day Moving Average and the 38.2% Fibonacci retracement level from the highs of March 8th to the lows of September 28th, near 1789. However, the US Dollar move lower on Tuesday helped push Gold higher, closing up 1.73%.
First resistance in XAU/USD is the December 13th high of 1824.52. Above there, price can move to the 50% retracement level from the previously mentioned timeframe at 1842.71, then previous highs from June 13th at 1879.16.
However, be on alert. If the DXY bounces, support is at the 200 day Moving Average near 1785.65. Below there, price can fall to horizontal support at 1735.21, then again at 1676.90.