The decline to the February low could be seen, but we doubt it. After all, the USD is after breakouts above the declining short-term support / resistance lines, so a move back to one of them seems more likely. This means the USD could decline to about 89 or so before the rally resumes.
We marked the target area with a red triangle. We think that the declining support line will trigger a reversal and we don’t think that the decline will take longer than a week. The latter is based on the pace at which the USD declined previously and also on gold’s triangle apex reversal – if gold is likely to reverse course in a week or so, then something similar could be seen in the USD.
Let’s keep in mind that the USD Index is above a combination of very strong support levels stronger than the mentioned medium-term support/resistance line. So, the fact that the USD closed the previous week below it, has only short-term implications, not long-term ones.
Gold’s Upside Target
Before providing you with a target area, let’s begin by recalling gold’s triangle apex reversal (we discussed it more thoroughly on Monday):
The apex of the triangle marks an important reversal date. We elaborated on this technique in the previous alerts, so we don’t want to go into the details once again. Long story short, the usefulness of this technique has been confirmed for the precious metals sector multiple times, including the recent cases (including the February 9 powerful reversal in mining stocks), so it’s something gold traders should take into account.
What we would like you to focus on is that we posted the above chart a week ago and wrote that a reversal could be seen in two weeks. One week has already passed, so we should now expect gold to reverse its course either late this week or early during the next.
The employment numbers are going to be released on Friday and they are quite often accompanied by volatile price swings. This could be the perfect trigger for the final part of the gold’s upswing. Mario Draghi is going to provide his comments on Thursday, which could also trigger some price swings. Overall, it seems that we should prepare for a Friday reversal and either back and forth movement or an upswing in the meantime.
But how high can gold go?