| R1 | 81.45 |
| R2 | 81.67 |
| R3 | 84.10 |
| R4 | 88.71 |
| S1 | 80.01 Recent low |
| S2 | 79.66 |
| S3 | 78.92 Recent low |
| S4 | 78.78 Neckline |
| S5 | 78.59 Support |
| S6 | 74.71 |
| S7 | 73.35 H&S target |
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MACD = Moving average convergence divergence
H&S = Head-and-shoulders formation
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Analysis
- The latest rebound in the dollar index has paused -the pullback may signal that the rebound has ended.
- If that is the case, a right-hand shoulder of a H&S pattern may be forming on the weekly chart (not shown). The whole of the rally from September forms the right-hand shoulder so the index would have to fall back to 78.78 to break the neckline and trigger the H&S.
- The stochastics have been trending higher but the lines have now crossed lower.
- The MACD has also turned negative.
- For now we will monitor the situation; however, outside the technicals, we would not be surprised if the dollar starts to suffer if negotiations over the US fiscal cliff do not run smoothly. The potential H&S seems to be warning of that.
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Conclusion
A move down below 80.00 on the dollar index would start to look ominous but that might well be bullish for gold.
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All trades or trading strategies mentioned in the report are hypothetical, for illustration only
and do not constitute trading recommendations.
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