Technical Overview of the U.S. Dollar.
We'll begin with the long-term chart.
Analyzing the monthly chart, we observe that the U.S. dollar is trading within a narrow range inside a triangle pattern (marked with blue dashed lines).
In May, the bulls managed to push the greenback slightly above the upper line of the formation, but this was short-lived. The buyers couldn't sustain these levels, resulting in a reversal and a fall back below the significant resistance line, invalidating the minor breakout.
This setback attracted the bears, leading to a decline and a monthly close within the triangle, which is a bearish signal.
The following month, the bulls attempted to break above the formation again, but, similar to May, the upper border of the triangle halted their advance, causing another downward move earlier this month.
Consequently, the greenback slipped below last month’s opening price, nearing June's low of 103.48.
How does this impact the gold rate in Dubai?
A closer look at the indicators reveals that the Stochastic Oscillator has generated a sell signal, providing the bears with further incentive to act. This decline in the U.S. dollar could influence the gold rate in Dubai, as gold prices often move inversely to the strength of the dollar.
Do the bulls have any allies in the medium term who can thwart the bears' pro-fall plans?
Let’s analyze the weekly chart to find out.
The first thing that catches the eye on the chart is the breakdown under the medium-term green support line, which now serves as an important resistance. This line is based on the lows of late 2023 and 2024 and the breakdown occurred at the beginning of the month.
This bearish development triggered further deterioration, taking the U.S. currency not only below the 500-week moving average but also beneath the 38.2% Fibonacci retracement based on the entire December-April upward move.
As a result of this price action, the bears also invalidated the earlier small breakout above the upper border of the orange consolidation. This led to a breakdown under the lower line of the formation, based on the mid-May low of 103.97, last week.
What does this mean for the currency and the gold rate in Dubai?
Further deterioration could lead to a slide down to 102.56, where the size of the downward move would correspond to the height of the formation. However, before the bears can reach this level, they will need to overcome the support area around the early June low of 103.48 and the 50% Fibonacci retracement (approximately 103.32).
If these supports fail, the path to the aforementioned target and the 61.8% Fibonacci retracement could open. It is also worth noting that just below these levels, the bulls have one more support—the March 2024 lows.
Before we move to the short-term picture of the U.S. dollar, please note that the sell signals generated by the CCI and the Stochastic Oscillator remain in play, supporting the sellers and further deterioration.
So, let’s take a closer look at the daily chart and see what it suggests about the next move and its potential impact on the gold rate in Dubai.
From this perspective, we see that the greenback reached the green support zone based on the previous lows. This area is also reinforced by the pro-bullish hammer candlestick from June 7, which, combined with the current position of the daily indicators, suggests that a reversal might be imminent.
However, considering the breakdown under the 61.8% Fibonacci retracement (unlike earlier in June when the hammer formed), the unsuccessful attempt to reclaim the previously broken 200-day moving average, and the bulls’ failure to close the red gap (104.13-104.04) from July 12, another downward move seems very likely.
If the bears manage to push the U.S. dollar below the lower border of the green support zone, we can expect an attack on the hammer and an attempt to neutralize it in the coming days.
If sellers are strong enough to drive the price below the low of this candlestick formation (at 103.48), the path to the next support zone around 103.17-103.25 (marked with blue) will likely open.
Summing up, thanks to yesterday’s breakouts, gold bulls have opened the way to the next resistance zone. The bullish scenario will be even more likely and reliable if the bears manage to push the greenback below the nearest supports, opening the way to the 76.8% and 78.6% Fibonacci retracements. Nevertheless, please keep in mind that the current position of the daily indicators in gold and the greenback suggests that the space for increases might be limited, and a reversal soon should not surprise us.
Stay tuned for updates on the gold rate in Dubai.
