Dollar Index, WTI Crude and Gold: short-term outlook
These are tricky times for technical traders, especially with this week being dominated by the events unfolding in Greece. It seems pointless trying to predict what will happen next week from a chart perspective when the outcome is really down to the politicians.
Therefore this week I will have a look at the short-term outlook for some of the markets which are likely to be less affected by these events.
It is worth revisiting the Dollar Index chart, see below.
Throughout June the index managed to hold above the May lows, which is more encouraging for bulls. The last two weeks have seen a decent recovery from the June lows and as you can see we are trying to break above the upper trend line of the three-month channel at 96.00/95.90.
We are holding above here as I write but need to see a weekly close above the 100-day moving average at 96.25 tonight for a more positive outlook into next week. This would help to confirm a positive breakout and we could perhaps see a move towards a Fibonacci target of 97.35/97.40, then May highs of 97.63/97.77. Further gains then meet strong resistance at the longer-term trend line at 98.00, as seen in the longer-term chart below. This will be the main challenge for bulls to a recovery in July.
A weekly close tonight back below the channel’s red upper trend line at 96.00/95.90 would signal a false breakout on the upside this week and should keep bears in control into next week.
WTI Crude broke the three-month trend line support on Friday last week to signal further selling pressure into this week and we broke the 100-day moving average at 5800/5795 plus the May lows at 5688. We are becoming oversold however as we approach longer-term Fibonacci support at 5645/40. This is a 50% drop from the March-May rally.
A weekly close below here tonight, however, keeps the pressure on to target 5555/50 and perhaps as far as longer-term Fibonacci support at 5460 into next week.
The Gold chart is quite hard to decipher with no clear trend direction now for three months.
Just looking over the past two months Gold is trading in a short-term bear trend with the bounce in June topping out at the 200-day moving average (the red line above). However we saw a strong bounce off the two-month trend line yesterday, as you can see in the chart. A short-term recovery now looks quite likely into next week. The first resistance is at 1174/75 but a break higher meets strong resistance at 1185/86 for a potential selling opportunity next week.
Two-month trend line support at 1157/1156 remains the key to the downside but traders should be ready to sell a break below 1153, which would target 1150 and then 1147/46, towards the March lows at 1143.
Jason Sen – Technical Analyst & Trader
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