When Gold heads up Dollar weakness and the Aussie and South African Rand strengthen ceteris paribus. So therefore if we are buying Gold this week we should be looking to go long AUDUSD and short USDZAR – well it depends on why Gold is heading up. Are traders buying Gold because of its shine or because of its safety. This makes a big difference to how money will flow. In risk off markets, Gold gets strong, probably due to negative interest rates of safe haven currencies like the Yen and Chf. Though in risk-off markets commodity currencies are weak. So how does one know if Gold is heading up due to risk off?

This is what I am paying attention to right now. As you know from my earlier trade plans, I had a plan to long EURUSD heading into the ECB meeting – if EURUSD up then USD down so Gold up and therefore AUDUSD up and USDZAR down ceteris paribus (i.e. no fundamental reason besides risk sentiment for Aussie or Zar to be weak). So I am looking at Gold and I am seeing bids coming in where I expected to see them and AUDUSD is at a price where I would consider looking for long opportunities though I need to know why Gold is heading up.

Enter risk on/ off tools:
1. Indices
2. US10Y
3. VIX – up 5.82% for the day though still very low at 10.55
4. Dollar
5. Gold

I have done some analysis below. Worth paying attention to in the coming sessions.

S&P 500 H1

Double top at WM3 with a lower low - target WM1. Tool one tells us we may be heading into risk off.

US10Y H1

Double bottom at WM2 with a higher high price coming up off the role reversal of the double bottom. Price could bead up to WM4. Tool two tells us we may be heading into risk off.

Dollar Index H1

Price has stopped making higher highs though is still above the 21.

Gold H1

Gold coming up off the support as per my trade plan posted at London open. Dollar is not very bearish considering how high Gold is moving so this may be due to the US10Y and not Dollar. This is important to pay attention to because this will determine whether I long AUDUSD and short USDZAR or if I see the move as risk off and therefore see commodities as getting weak. If this is due to risk off then Aussie will be weak against the USDollar and Yen. Keep an eye on those charts. If we do head into risk off then that means Yen strength and Chf strength.

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