The USD Index (DXY) is taking another hit today, erasing all of Thursday’s gains and more.
Watch today’s video below to see how this could impact your favorite markets, including the DXY, EURUSD, GBPUSD, USDCAD, and XAUUSD.
US Dollar Index (DXY) Forecast
The DXY has struggled in August, breaking below the multi-month descending channel and now testing the 102.20 support level.
I’ve previously discussed the 2023 channel (see the video above) and its significance in the price action over the last 20 months.
The dollar index bounced off channel support on August 5th and again on the 14th.
However, dollar bulls are having difficulty pushing the greenback toward range resistance at 103.50.
I still believe there’s a decent chance of a 103.50 retest next week, but only if the DXY holds above 102.60 on a daily closing basis.
With the dollar range-bound, it’s best to approach the major currency pairs with a similar strategy.
EURUSD Forecast
The EURUSD began August with an incredible two-day rally that spanned 225 pips.
If you saw the analysis just before I went on vacation, you knew 1.0780 was the EURUSD support level to watch this month.
The euro put in a low of 1.7777, just three pips below our key level, on August 1st, and the rest is history.
I’ve also discussed how the 1.1009 level could come into play as a magnet based on the price action in early 2024.
That level served as resistance for the EURUSD on August 5th.
Fast forward to today, and
GBPUSD Forecast
GBPUSD is breaking out again today, this time above 1.2900.
The pound reclaimed a significant level on August 13th, as mentioned in a previous blog post.
The target from that analysis was, and still is, 1.2960.
GBPUSD is now approaching that area, which could come into play early next week.
USDCAD Forecast
USDCAD is approaching a significant level in the 1.3660 range.
This level aligns with the trend line from the 2021 low and a descending trend line from the April high.
Considering where the DXY is trading, it’s crucial for the dollar index to hold above the 102.20 region for USDCAD to have a chance at a move higher.
If the US dollar shows strength while USDCAD is testing 1.3660, this could be a setup to watch.
Gold (XAUUSD) Forecast
Gold is attempting what could be a significant breakout today.
XAUUSD has been trading within an ascending channel since April, so a breakout here could signal the next leg up for gold.
However, since it’s Friday, any breakout should be approached with caution.
If XAUUSD closes today above $2,475 but fails to hold above that level next week, it could lead to a fakeout, presenting an opportunity to trade toward the recent range lows.
While we can’t predict if this will happen, it’s worth considering, especially given how the first breakout often fails.
