Taking profits on our short positions and closing them on Thursday turned out to be a good idea. Gold, silver and – on an intraday basis – mining stocks moved higher on Friday, while the U.S. Dollar Index declined. But, is the rally over after just one day? Not likely – gold’s and miners’ turning points are likely to result in something more than just a daily rally. So, how high is gold likely to rally this time? That’s what we discuss in the following part of today’s alert.
But first, let’s take a look at what happened in the USD Index (chart courtesy of http://stockcharts.com).
USD’s Erratic Movement Is Not That Erratic
In the previous analyses, we wrote that we were still skeptical about the USD’s upswing as the confirmation of the USD’s move above the medium-term support/resistance line was still rather weak.
The less bullish view of the situation turned out to be true, as the index closed the week once again below the mentioned declining line. The interesting thing is that it happened after the USD Index corrected to the 38.2% Fibonacci retracement based on the November 2017 – February 2018 downswing.
The former means that the move lower was not accidental but was likely a way for the USD to take a breather during the rally. The move below the medium-term declining line means that the downswing may not be over. Previously, when the USD moved below the medium-term line, it moved to new 2018 lows, and traders definitely remember it. Therefore, some of them will likely bet on the repeat of that scenario. But, will they be correct?