Historical Overview of DJI DXY and GOLD as recession fears hit the top: Part 2
DXY, EURUSD and GOLD-SILVER
DXY and XAUUSD both moving in the same direction. It may be interesting at first sight but we see a similar correlation when we check the historical charts. – See our headline DJI DXYGOLD Weekly Chart Part 1-.
What is history telling us?
- As seen on the chart, 2000 and 2008 crisis ended up with a DXY Rally.
- Before the crisis, DXY and Gold were moving in the same direction.
- The medium-term, crisis caused a 15%-20% decline in Gold Prices.
EURUSD & DXY
EURUSD is the heaviest component of the Dollar Index basket. That is why we focus on EURUSD to have a better and much more clear view.
U.S Data remain better than market expectations. The Retail Sales data was much better than better. But the significant positive changes and revisions in Unit Labor Cost and Non-Farm Productivity were remarkable. The data and its revised components showed that Powell was right about the US Economy.
On the other hand, we continue to receive disappointing data from Eurozone. Besides the disappointing data set, we can get clear and strong negative signals from other indicators.
As you see on the below chart Euro Stoxx Bank Index is melting. This is not the end but just the beginning.
As seen on the headline Dollar Index chart, after FOMC meeting and FED’s rate cut decision, DXY tested 99 and retraced. The index completed the correction and headed North.
It is likely to re-test 98.40 resistance. Breakout of 98.40 could accelerate the bullish move. 99 and 100 will be the next target levels of the Index.
At this point, we need to see another sell-off in EURUSD to support the DXY rally. A daily closing below 1.08800 in EURUSD will trigger the Global Dollar Rally.
GOLD and SILVER
I will post three charts:
ETF’s Gold Positions vs Gold Price
Goldman announced a bullish Gold prices forecast considering Central Banks Physical Gold purchases and ETF’s Gold Positions. As seen on the chart ETF’s Gold Positions has reached a volume where the Gold was pricing in 1.800$. This chart is a sign of manipulation. We may see a sharp move of 100-150$ in Gold Prices near term.
We will publish our 2019 Q4 Gold forecast in this week. So, I will not go into the price details in this artcile.
However, history is showing that, during the Global Crisis, Gold prices fall after a consolidation. A decline of 300-400$ in Gold Prices is likely.
ETF’s Silver Positions vs Silver Price
As seen on the chart ETF’s Silver Positions has reached a volume where the Silver was pricing in 50$. Here another significant point is the JP Morgan’s Silver Stocks in Comex.
JP has 50% of the stocks. And the remarkable part is the ratio of eligible/registered silver stocks.
Simply speaking, once the long contracts ask for physical silver, there will be no physical Silver on Comex. But JP’s eligible silver stocks will be ready for the market.
That is why we like to stay in the Silver’s side while trading precious metals. When the Gold/Silver ratio breaks below 84, we may see a strong Silver Rally. I have published my long term silver forecast before. Said forecast is still valid.
Now we focus on EURUSD and DXY. A daily closing below 1.08800 will trigger the DXY and Global Dollar Rally. This would change the latest convergence in DYX/Gold relationship.
VERIFIED ACCOUNT AND SETUP RESULTS
Subscribe to our premium packages if you would like to get 1000+ instruments analysis and trade signals of Chartreadreadepro.
You can contact us via Skype User Name: Chartreaderpro
DISCLAIMER: This is a technical analysis study, not advice or recommendation to invest money
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these securities. You should do your own thorough research before making any investment decisions. Chartreaderpro does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Forex involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility