US Dollar, EUR/USD React at Range Extremes as Gold Recovery Goes Higher

US Dollar Talking Points:

• The US Dollar has finally found some resistance after filling the FOMC gap from last November, and this has helped EUR/USD to bounce after last week’s test at the 1.0500 handle. I looked at both setups in last week’s webinar before those levels and zones came into play.
• Gold continues to recover after the sell-off drove for the first half of the month and bulls have continued to press the short-term trend there.

It’s still early but so far, EUR/USD bulls have continued to press after last week’s defense of the 1.0500 level. And accordingly, there’s been a clean pullback in the USD following the gap-fill from last November’s FOMC rate decision. I went over both of those markets and quite a few more in the webinar video linked above and, in this article, I’ll recap some of the high points.

EUR/USD

It’s still early but so far there’s been continued defense of 1.0500. That price traded briefly last Thursday and that led to a bounce that has continued to see higher-lows enter the mix.

Yesterday showed resistance at the 1.0600 handle but the pullback from that has again held a higher-low; and as of the webinar and this writing, the daily bar in EUR/USD is showing an extended underside wick to highlight that bullish reaction and higher-low. This keeps the door open for continued pullback potential in EUR/USD, and I’m tracking next resistance at Fibonacci levels plotted at 1.0611 and 1.0643, followed by the 1.0700 psychological level that offered a bounce after the election sell-off two weeks ago. Above that, there’s a zone at 1.0750-1.0765 and that’s followed by the 200-day moving average which is confluent with a Fibonacci level at 1.0862.

EUR/USD Daily Price Chart

Chart prepared by James Stanley, EUR/USD on Tradingview

US Dollar

While EUR/USD is bouncing from range support, the US Dollar is dropping from range resistance. The weekly chart shows this well as the 107.00 area is the same that held bulls at bay last year, leading into the November FOMC rate decision.

US Dollar Weekly Chart

Chart prepared by James Stanley; data derived from Tradingview

In last week’s webinar I talked about the gap from last November’s FOMC meeting. DXY closed on the day of that rate decision at 106.88 and then opened the next day at 106.51, leaving the gap on the chart until it was finally filled last week.

But it’s since that gap was filled that flows have started to shift, which I’ll look at below.

US Dollar Daily Chart

Chart prepared by James Stanley; data derived from Tradingview

On the four-hour chart below we can see a series of lower-highs posting after the gap was finished off last week. The 107.0 level traded briefly but there were no four-hour candle closes above that price, and since then price has pulled back to retrace 23.6% of the election rally, taking the low from earlier in November up to last week’s high.

This keeps the door open for a larger pullback and there’s deeper support potential at Fibonacci levels of 105.65 and 105.22, the latter of which is confluent with another Fibonacci level at 105.14.

US Dollar Four-Hour Chart

Chart prepared by James Stanley; data derived from Tradingview

Gold Recovery

Gold was a high-flyer for most of the year and this seemed to sync well with FOMC dovishness. More recently, however, especially after the FOMC meeting following the election, the pace of rate cuts has been in question and that’s helped to prod a deeper pullback in gold prices.

Last Thursday saw a support test at the 50% mark of the June-October move and that led to a strong reaction from buyers. That was followed by a doji and inside bar last Friday but, so far this week, buyers have been pressing forward. I looked at this yesterday morning and since bulls have taken out the 2617 level that I noted previously.

Gold Daily Price Chart

Chart prepared by James Stanley; data derived from Tradingview

Gold Near-Term

The trend in gold since that Thursday support hit has been clean and fairly one-sided. The 2617 level looked at yesterday has since come in as higher-low support but, realistically, it’s the 2600 zone that bulls need to hold to retain control of the near-term trend. There’s quite a bit going on in that range, with the 38.2% Fibonacci level from the same study referenced above at 2597.94, and then a prior price action swing at 2602.57.

For resistance, there’s a big spot overhead from around 2643-2650 and that’s followed by a Fibonacci level at 2671.

Gold Four-Hour Chart

Chart prepared by James Stanley; data derived from Tradingview

--- written by James Stanley, Senior Strategist