Falling USD index might trigger the golden setups for gold traders

bullish and bearish retracement level in the gold market

The U.S economy is facing an extreme level of uncertainty under Mr. Trump new administration. No one certain about the newly elected U.S president next movement. On 8th November 2016, Mr. Trump stated that they will include tax cut policy and increase the fiscal spending to bring stability in the economy. But 5 five months have passed but there is no sign from the Mr. Trump to fulfill his commitment. This has created a drastic impact on the U.S consumers and the U.S dollar index has been falling hard for its 14 years high in the global market. Despite free falling of the U.S dollar index, the professional Aussie traders in the forex trading industry are cautiously waiting on the sideline at the current moment as 96.20 level is going to provide a significant amount of support to the green bucks. If the green bucks gain some fresh buying power from that level than the price of gold will tumble down in the global market.

Gold market current condition

The price of gold is skyrocketing for the last four consecutive months by utilizing the weakness of the green bucks in the trading industry. The expert Aussie traders went long in the gold market after the market hit the critical support level at 1123.67 in the global market.

bullish and bearish retracement level in the gold market
Figure: bullish and bearish retracement level in the gold market

From the above figure, you can clearly see that the market respected the 50 percent bullish Fibonacci retracement levels in the global market. And the professional traders in the forex trading industry went long with the bullish pin bar formed at the 50 Fibonacci retracement level. As you can see, currently the price is heading towards the 61.8 percent bearish Fibonacci retracement level which is a strong sign for the professional Aussie traders to stay alert in the upcoming weeks. The expert traders in the forex trading industry will go short with the formation bearish price action confirmation signal near the 61.8 percent bearish retracement level drawn on the daily chart.

Fundamental factors

Fundamentally the U.S dollar is going to weaken in the upcoming weeks as there is no major news release which will boost the green bucks in the global market. The professional traders at Saxo are expecting to see a decent drop in the U.S dollar index towards the critical support level at 96.20. So if the U.S dollar index hits 96.20 level in the global market then we will see a decent rise in the price of gold towards the critical resistance level at 1264.77. This level is going to provide a significant amount of selling pressure to the gold market as most of the professional investors are cautiously waiting to short the gold at the bearish trend line resistance.

Meanwhile, the FED is most likely to hike their interest rate on the basis on 25 points in the month of June and if FED chairperson Janet Yellen comes up with a hawkish hike then the U.S dollar index will start its aggressive bullish rally in the global market. Such a strong bullish rally of the green bucks will significantly push the price of gold lower giving the investor a sweet chance to ride the long term bearish trend in the market.

Market plan

Trading the financial instrument involves a high level of risk so no matter how reliable the trading signal is we must trade with proper risk management factors. As a professional trader, you should not risk more than 2 percent of your account capital in a single trade to avoid unexpected huge losses in the market. If the price of gold breaches the critical trend line resistance level in the upcoming days then we will wait for the minor retracement of the price to enter long near the broken trend line resistance which will turn into a strong support zone. But still, we will avoid aggressive entry and use price action confirmation signal to reduce the risk exposure.

Summary: Fundamentally the price of gold is most likely to go up in the upcoming week but traders should be extremely cautious as a strong resistance piles up ahead to cap the bullish rally of the gold market. On the contrary, we are most likely to see a decent jump in the U.S dollar from the critical support level at 96.20 which will also favor our short position in the global market. Though everything is indicating a sweet setup in near future in the gold market but the professional Aussie traders are extremely careful and they are not willing to take any aggressive short in the chaotic market. They will wait patiently and enter the market with highly reliable bearish price action confirmation signal near the bearish trend line resistance of the gold market.