Elliott Waves: Gold Rallying As US Dollar Hits Resistance

The US Dollar Index appears to be turning lower due to speculation that the Federal Reserve may not withdraw stimulus as fast as first anticipated (because of COVID and delta variant). And this should help Gold move higher.

Stocks are also back at the highs after the FDA approved Pfizer’s covid vaccine. So it seems that financial markets are in a risk-on mode. This sentiment that may not change until we get more details after the Federal Reserve’s Jackson Hole (Central Banking) meeting this week.

If the US Dollar begins to head lower, then it shouldn’t be a surprise to see the Euro (EURUSD) move higher. And that’s exactly what Elliott wave analysis is saying. Again, this supports the current Gold trading rally.

As per Elliott Wave analysis, the EURUSD came down into a wave 5 which broke beneath March levels. The EURUSD also traded close to our projection levels for a fifth wave at 1.16-1.1650 area. Bulls may be nearing an opportunity. Looking at the chart below, we can see that this currency pair is now trying to recover with a small impulse after the divergence on the RSI which is normally a bottom formation. However, we still need that push and daily close out of a downward channel to confirm a bullish reversal.

EURUSD Elliott Wave Analysis Chart

eurusd currency trading bottom reversal elliott wave analysis chart image

At the same time, it is worth mentioning that the US Dollar Index (DXY) is facing resistance with its short-term bull run (see chart further below).

This resistance comes after what appears to be a three wave recovery from the 2021 low. If the US Dollar pullback continues in earnest, then we think this will be positive for gold. Find out more about the trading setup for gold in the video below:

DXY Elliott Wave Analysis Chart

us dollar index elliott wave trading analysis abc top reversal chart image

Twitter:  @GregaHorvatFX

The authors may have a position in the mentioned securities at the time of publication. Any opinions expressed herein are solely those of the author, and do not in any way represent the views or opinions of any other person or entity.

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