The KEY breakout for many markets including Gold
|The USD Index just did something that many thought was impossible. It closed back above its April bottom.
In the previous weeks, and in particular in late June, I read more bearish things about the USD that I can count. And yet, ever since bottoming at the turn of the month (in perfect tune with its cyclical turning point), the USD Index has been moving higher.
Slowly, but surely.
One daily rally at a time.
Strength amid uncertainty
I’m sure that barely anyone noticed this quiet rally before yesterday. We haven’t seen such a long streak of daily rallies in a long time, but it is seldom that the quietness that gets noticed.
The really important thing is that all those daily rallies happened while we saw more and more chaotic news regarding tariffs and threats to Fed’s independence. The USD’s resilience and the ability to move higher despite all that was the true show of strength. It was obvious that this is the beginning of something new – the post-Peak-Chaos rally.
Yesterday, we finally saw a more decisive rally and – finally – a clear bullish confirmation. The USD Index closed the day back above the lowest close of April, which means that all those small daily rallies were not accidental.
And the best part? Yesterday’s rally happened after an increase in the inflation numbers, which – in theory – should make the USD weaker (after all, higher inflation means that the same amount of dollars can purchase fewer goods).
The USD Index IS breaking higher.
The USD Index has almost certainly formed a major bottom at the turn of the month.
The USD Index is very likely to rally much further.
Today, the U.S. currency is quiet, which is perfectly normal after a day with increased volatility.
Why it matters beyond forex
Why is all this important for everyone, not just forex traders?
Gold, silver, copper, and other commodities are priced in the U.S. dollars. Yes, they can move in the same direction temporarily, but they can’t completely decouple from the currency they are priced in. This means that commodities might soon get a bearish push – similar to the one that they got yesterday, but a much bigger one.
Want free follow-ups to the above article and details not available to 99%+ investors? Sign up to our free newsletter today!
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 assets. You should do your own thorough research before making any investment decisions. FXStreet 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 Open Markets 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. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.