The yellow metal drops like a rock on the short term as the USD edges higher on the short term. Gold resumed the bearish movement and seems like it is attracted by a very strong confluence area. The USDX’s rally has sent the Gold down, so a further increase will force it to drop much deeper.
Gold approaches a very strong support level and only a valid breakdown will signal a larger drop in the upcoming weeks.
The current drop was expected after several false breakouts above a very strong dynamic resistance. Right now is premature to talk about a larger drop as the rate is still trapped within an extended sideways movement.
The USDX has finally managed to jump above major and crucial dynamic resistance and seems determined to reach new highs. I’ve said in the previous weeks that only a valid breakout will really confirm the USD’s dominance.
The Aussie and Kiwi sell-off have forced the Gold to drop as well. The yellow metal plunged after the US data were sent to the public. The Durable Goods Orders rose by 2.6%, beating the 1.6% estimate, the Unemployment Claims have dropped unexpectedly lower in the previous week, from 233K to 209K, much below the 230K estimate, while the Goods Trade Balance increased to -68.0B, from -75.9B in the former reading period.
The Prelim Wholesale inventories rose by 0.5%, less versus the 0,6% estimate, which is good for the currency. The greenback wasn’t too impressed by the Core Durable Goods Orders failure to increase by 0.5% as expected.
The rate dropped after the false breakouts above the outside sliding parallel line (sl) and now could reach the confluence area formed between the second warning line (WL2) of the former ascending pitchfork with the upper median line (uml) of the major red descending pitchfork.
A valid breakdown through the mentioned confluence area will accelerate the sell-off in the upcoming period.