Gold, Silver and US Dollar Index – Near-Term Technical Outlook

US Dollar Index (I.USDX)

The index continues to face difficulty in clearing 98.00 strong hurdle, marking a descending trend-line extending from a multi-year high touched in March through April highs. However, the index has managed to hold a short-term ascending trend-line support extending from June. This combination of 98.00 resistance and the short-term ascending trend-line support seems to constitute towards formation of a bullish Ascending Triangle on daily chart. Hence, a clear break-through 98.00 level, confirming a bullish break-out, is more likely to open room for a fresh leg of up-move for the index, possibly towards 99.50-60 resistance in the near-term. Alternatively, should the pair fail to conquer 98.00 mark resistance and starts drifting lower, it is likely to find support at the ascending trend-line, currently near 97.40-20 area. Moreover, a decisive break below the ascending trend-line support, negating the Ascending Triangular formation, is likely to continue dragging the index lower, initially towards 96.00 round figure mark and eventually towards its next major support near 95.60-50 horizontal level.

Gold

The yellow metal remains in a well-established downtrend, as depicted by formation of a descending trend-channel on weekly chart. Currently the metal is trading close to a very important support confluence near 1080-70 region, comprising of the lower trend-line support of the channel and 50% Fib. retracement level of its 10-year long bull-run that started in 2001 and peaked in 2011. Hence, a decisive break and close below this strong support has the potential to continue exerting pressure on the yellow metal initially towards 1000 psychological mark support, which might further get extended towards its next major support near 900 mark also coinciding with 61.8% Fib. retracement level. Meanwhile, the metal has failed to move beyond 1100 mark in the current week and thus become immediate level to watch for. Rebound from current support level, leading to a move above 1100 mark, is likely to trigger a short-covering rally immediately towards 1140 horizontal resistance. Moreover, sustained strength above 1140 level resistance might further boost the pair towards next major resistance near 1235-40 region, with intermediate resistance at 1200 round figure mark.

Silver

Similar to Gold, Silver too is oscillating within a well-established medium-term descending trend-channel. However, since last three weeks, the white metal has been moving within a tight range between 15.00 on the upside and 14.35 on the downside, which is close to 100% Fib. expansion level support near 14.00 level. Hence, a clear break on either side might now generate the required momentum that could possibly decide the near-term trajectory of the metal. Should it manage to strengthen above 15.00 mark, it is likely to immediately aim towards 15.50 intermediate horizontal resistance and might even extend the momentum beyond 16.00 mark towards testing the upper trend-line resistance of the descending channel, currently near 16.20. Meanwhile, weakness below 14.40-35 area is likely to be followed by an immediate drop towards 100% Fib. expansion level support near 13.90-80 area. A sustained break and close below 14.00 mark might now trigger a fresh leg of downward momentum, initially towards 12.90-80 intermediate support and eventually towards testing 11.00 mark support, representing the lower trend-line support of the channel.

Follow me on twitter @Fx_Haresh for latest market updates