US Dollar Index Slightly Negative; Gold and Silver Rise

The US Dollar Index had a slightly negative session on Monday, but did remain within the up trending channel that we’ve been watching lately. The candle did form something that looks a bit like a hammer, and as such we think that Dollar strength could be coming in the relative near term.

This might not necessarily be about the US dollar itself. Remember, the Euro makes up about 40% of the weight of this index, and this could be signaling that we are about to see another round of Euro weakness.

Either way, we think that a break above the 83 level clears the way to 84 and possibly even higher. We would become very bullish above the 83 level, and would be willing to hang on until we saw 84.50 or so. As for selling the “Dixie”, we would need to see the 81.50 level get broken to the downside on a daily close.

The prices of precious metals, much like many other commodities, changed direction from last week and declined on Monday. The speculations around the future plans of ECB and Bank of China in regards to their respectivestimulus plan could continue influencing bullion traders. Currently, gold and silver prices are rising. On today’s agenda: Great Britain CPI, Euro Area GDP 2Q2012, German and Euro Area ZEW economic sentiment, U.S. Retail Sales, Euro Area Industrial Production and U.S. Producer Price Index.

As seen below, the chart presents the changes of normalized prices of precious metals in during the month (normalized to 100 as of July 31st). During August gold and silver didn’t do much.

On Monday, Gold declined by 0.63% to $1,612.6; Silver also fell by 1.05% to $27.77. During August, gold edged down by 0.12%; silver, by 0.53%.

Resources:

Lior Cohen: Commodities Analyst, Dailyfx.com

Christopher Lewis: FXempire Analyst

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