I mentioned gold (XAUUSD) in Saturday’s Weekly Forex Forecast.
The idea was that we could see weakness this week, given Friday’s close back below the August trend line.
However, the $1,990 support level is crucial to any bearish bias.
So far this week, XAUUSD has tested $1,990, but we’ve yet to get a daily close below.
That means $1,990 remains key support for gold, so shorting right now is ill-advised.
But if we see XAUUSD lose the key level on a daily closing basis, a move toward $1,920 seems likely.
That would also affect other markets, considering the negative correlation gold shares with the US Dollar Index (DXY).
The chart above shows gold (inverted) in blue against the DXY in orange.
Because XAUUSD is inverted in the chart above, gold and the USD share an inverse or negative relationship.
So if gold loses $1,990 support this week, it means we likely see further upside from the dollar.
That’s something to keep an eye on if you’re trading pairs like EURUSD and USDJPY.
Alternatively, a move above last week’s high would invalidate the immediate bearish outlook for gold and also send the dollar lower.
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