It’s The USDX’s Déjà Vu Moment

It’s uncanny how the USDX is mirroring its moves back in 2017-2018. This remarkably similar pattern proves that once in the elevator, the dollar is going up.

Gold, meanwhile, is experiencing a corrective moment amidst a bigger downswing, while the miners are undergoing a decline on bigger volume than they had during last week’s correction. The signals remain bearish for the precious metals.

In yesterday’s flagship Gold & Silver Trading Alert, I emphasized that the next short-term top had most likely already formed last Thursday (Apr. 8). The basis for this was the triangle-vertex-based reversal in gold as well as the USD’s correction that appears to be analogous to its 2018 correction that was followed by another powerful rally.

In short, the above expectation (and reasoning behind it) remains up-to-date. Let’s start today’s discussion with a look at the USD Index.

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The USD Index

In short, the USD Index is trading sideways after moving to its mid-2020 lows and to its 38.2% Fibonacci retracement level. This combination of support levels has likely created a bottom in the USD Index, but that’s not the only factor that needs to be considered. The other – very important factor – is the continuous similarity in the USDX to how it rallied in 2018 after a very similar yearly decline. I wrote about it previously, and these comments remain up-to-date.

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The similarity between two declines (2017-2018 and 2020-2021) is so big that it’s almost useless to describe it. Almost identical starting points, extremely similar ending points, and a very similar correction after the first half of the decline. The recent decline was a bit shorter, but otherwise, both price moves are almost identical.

In both cases, the declines have ended below 90 and the final confirmation came when the USD Index rallied above both: its declining blue resistance line, and the 50-day moving average, which is also marked in blue. There was also – in both cases – a pullback after the USD Index soared above its 200-day moving average that I marked in red. That’s the “you are here” point on the roadmap.

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Disclaimer: All essays, research, and information found above represent analyses and opinions of Matthew Levy, CFA and Sunshine Profits' associates only. As such, it may prove wrong and be ...

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Erikas Ivan 4 weeks ago Member's comment

Thank you, comprehensive and impressive analysis, as always!

Przemyslaw Radomski, CFA 4 weeks ago Author's comment

Thanks for following my analyses and for the feedback, I appreciate it

Craig Newman 4 weeks ago Member's comment

Yeah right The fact that M2 is not updated the same way must surely be extremely bullish for the dollar Lol!!

Przemyslaw Radomski, CFA 4 weeks ago Author's comment

I'm not commenting on M2 in this article at all. That's a bearish factor, of course. Not something that's likely to move the market in the short run (more than it already did), though. Also, it doesn't change the picture for the Eurozone or Japan and let's keep in mind that the USD Index and currency exchange rates move on a relative basis. In other words, out of all the ugly things (fiat currencies), the USD might still be one of the best looking ones.