US Dollar Index Heading Toward The Critical Profit-Taking Zone

May 22, 2017

There has been a massive confusion in the global industry from the very beginning of the year 2017 as Mr. Trump new administration has put the investor’s community into a dense cloud where they have no précised clue regarding the next movements of the market. During the US presidential election held on 8th November 2016, Mr. Trump stated that they are going to increase the fiscal spending and include tax cut policy to bring long-term stability in the US economy. Upon the declaration of such an optimistic statement from the newly elected president the US dollar index secured a 14 years record high in the global market pushed most of its major rivals down in the CFD trading industry. But things have drastically changed from the very beginning of the year 2017 as Mr. Trump failed to keep his promise.

Let’s See The Graph Of US Dollar Index

Figure: US dollar index sharply falling from its 14 years record high

From the above figure, it’s very clear that the dollar bulls has lost their control over the market and green bucks are sliding lower pretty fast. During the crash of the U.S dollar index in the global economy the Aussie traders made a decent profit by going long into the AUDUSD pair in the CFD trading industry. Most of the leading investors are thinking that the dollar bulls are done for the year 2017 but if you closely look at the above chart of the U.S dollar index then you will notice that there is strong possibility for the dollar to turn around in near future. Currently, the U.S dollar index heading towards the critical support level of 96.45 which is also the 61.8 retracement level for this pair. So a bullish price action confirmation signal near the 61.8 % retracement level in the U.S dollar index will create fresh buying pressure in the CFD trading industry.

Gold vs. US Dollar Index

The price of gold is very sensitive to the movement of the U.S dollar index since it’s measured in the dollar. A slight variation in the value of the dollar creates an extreme level of price fluctuation in the gold market. The professional traders at Australia always look for a strong correlation between the gold price and U.S dollar index to execute high-quality trades in the market.

Let’s see the current gold market conditions

Figure: Price of gold heading towards the daily bearish trend line

As you can see from the above chart that the gold price has still some room to proceed upwards in the daily chart, so we can conclude that the dollar index will fall further more in near future. From our U.S dollar chart analysis, we already know that the U.S dollar index has to go further down to test the 61.8%.That means we will have a strong confluence of signals in the market if the U.S dollar index retests the 61.8 retracement level and meanwhile the price of gold should test the bearish trend line resistance. But we a clear break of the 61.8 % retracement level of the U.S dollar index will confirm the establishment of a medium term bullish trend in the market and the bears will again take the driving seat for the U.S dollar index.

Summary: Trading the financial instrument is one of the most complex tasks in the world. But if you look at the professional Australian traders then you will notice that every single one of them trade the gold in correlation with the U.S dollar index. The current position of the U.S dollar index and gold price suggest us that we might have a golden trade setup in near future. So we will be cautiously waiting for the price to give us reliable price action signal to execute our trade in the market.  


The California Gold Rush began on January 24, 1848 when gold was found by James W. Marshall at Sutter's Mill in Coloma.

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