Gold breakout needs confirmation January 12, 2018

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The Gold increased and resumed the bullish movement as the USDX plunges aggressively on the Daily chart. The dollar index seems unstoppable, drops like a rock erasing everything in its way. A USDX’s further drop will force the USD to lose more ground versus its rivals, the gold will take advantage of this situation and will reach fresh new highs.

The yellow metal increased significantly also because the Aussie and Kiwi have reached new highs versus the greenback. The rate has managed to jump above two very important dynamic resistance levels, but the breakout needs to be confirmed. Technically, it is expected to climb further, I believe that only the fundamental factors could turn it to the downside again.

Gold received support from the Chinese economic data, the Trade balance has come in better than expected, the surplus increased from 264B to 362B in December, even if the specialists have forecasted a drop to 237B. The USD-Denominated Trade Balance increased from 40.2B to to 54.7B, beating the 36.9B estimate, while the New Loans have dropped from 1120B to 584B, much below the 997B estimate. Moreover, the M2 Money Supply rose by 8.2%, less versus the 9.25 estimate and after the 9.1% growth in the former reading period.

Price rallied and jumped above the 1327 previous high, above the upper median line (uml) of the minor red descending pitchfork and above the first warning line (WL1) of the ascending pitchfork. A valid breakout above the WL1 will signal a further increase in the upcoming period. I’ve said in the last weeks that a failure to reach the WL1 and the upper median line (uml) will signal an exhaustion and a potential drop. Gold rallied as the USDX plunged, the current increase is somehow natural after the breakout above the 50% Fibonacci line (descending dotted line). Right now only a false breakout above the WL1 will signal a minor corrective phase.

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