Price is currently at MS2 heading into the second week of the month. Pivot theory tells us that if price is at a monthly reversal pivot early in the month we can expect price to make its way back to the monthly central by the end of the month. As we know Gold is the anti-Dollar and is a safe haven in risk-off markets. Therefore we would also observe price action in the US10Y and Dollar Index. Dxy is at the right price for a drop and the US10Y is at the right price for a rise (that means yields down). If US10Y yields move lower then that means stocks move lower which means we will see Yen and Chf strength.
We have FOMC this week and the Fed are expected to hike by 0.25 bps. We also have all the speculation surrounding the tax bill which has been driving the Dollar higher and helping with Yen weakness. What is the case for a weaker Dollar and lower yields? Perhaps a more Dovish Fed or a delayed sell-off in the Greenback from lower wages in Friday’s NFP report? Or are Euro Bulls about to enter the market ahead of the ECB meeting this week because they know that the ECB is going to cut their APP in half until next September? Some more evidence against Trump in the Flynn case? A failed tax plan? That’s a lot of what if’s and speculation.
The one fact I have is Gold is at MS2 and is going to move higher at market open. Will Bears sell the role reversal of the previous range? It is resistance and we would expect to see Bears sell there though we must keep in mind that if Bears are getting out at MS2 they would probably want to sell high so price could end up back at MPP or even the top of the range. It makes sense to manage risk as we approach these levels.
Here are the predicted pivot point levels for the week ahead as plotted on the charts below:
Dollar Index (FXCM)
Note. Pivot points are just projections and may differ at market open. Calculated using high, low and close of the previous week as per FXBootcamp Guide to Strategic and Tactical Forex pg. 668