Gold, US Dollar, EURUSD Technical Analysis: Trends Amid Dollar Strength and Inflation Risks

The US Dollar (DXY) strengthens as market optimism grows over Trump’s potential legislative control. This control could enable the implementation of economic policies seen as inflationary but supportive of the dollar. Recent US inflation data has reinforced expectations for the Federal Reserve (Fed) to proceed with a December 25 basis point rate cut. A rate cut would typically weigh the dollar, but the overall policy outlook remains positive for the US dollar.

Gold (XAU) prices have dropped from solid resistance due to overbought conditions. The strength of the US dollar also supported this decline. Additionally, recent outflows from Gold Exchange Traded Funds (ETFs) have added downward pressure on gold prices. An inverse correlation between gold and Bitcoin was observed, as Bitcoin surged to record highs while gold declined. This may be due to investors shifting their focus to alternative assets like Bitcoin.

The Euro (EUR) is struggling against the US dollar and is waiting for the European economic data. The Eurozone’s Q3 GDP confirmed only a modest 0.4% gain, while industrial production fell sharply, adding further weight to the Euro. With the Euro weakened and the USD strengthened, the EUR/USD pair remains under pressure, highlighting the contrasting economic outlooks between the US and Europe.

Gold (XAU) Technical Analysis

Gold Daily Chart – Reversal from Resistance

The daily chart shows that gold is moving within an ascending channel, with the price consolidating at strong support. The black trend line within the ascending channel defines this support. The RSI is approaching the support region, indicating a potential upcoming bottom. A break below this trend line would open the door for a deeper correction.

Gold 4-Hour Chart – Correction

The 4-hour chart shows a strong price rebound from the support at $2,550. This support region is significant as it aligns with daily and weekly support areas. A strong rebound from this level may indicate the start of a new rally in gold. Oversold conditions are observed on the 4-hour chart, as the RSI indicates. A break below $2,540 indicates further decline.

US Dollar (DXY) Technical Analysis

US Dollar Daily Chart – Resistance of 107

The daily chart for the US dollar shows that the index hit the target of 107 and reversed lower. The correction from this resistance highlights the significance of this area. The market is trying to avoid a break above 107, which would likely trigger a strong move in the US Dollar Index.

US Dollar 4-hour Chart – Ascending Channel

The 4-hour chart for the US dollar index shows the formation of an ascending channel, with the index briefly consolidating around the channel resistance. This price behavior is due to the strong resistance at 107. Since the RSI is overbought, a correction from this level is likely.

EURUSD Technical Analysis

EURUSD Daily Chart – Approaches Strong Support

Since the US dollar index hit resistance, EUR/USD has reached long-term solid support. The October 2023 lows highlight this support. The price is still under extreme pressure. However, the pair will likely find a rebound from $1.0466 rea. The strong resistance area in the US dollar further supports the reversal.

EURUSD 4-Hour Chart – Strong Volatility

The 4-hour chart for EUR/USD shows the pair rebounding from a strong support region. This drop in EUR/USD was driven by Trump’s victory in the presidential election, leading to significant price volatility. The RSI indicates that EUR/USD is poised to form a bottom around these levels and initiate a strong move higher.