US Dollar Gains Ground Against Euro and British Pound

The US dollar index surges past 97.40 to a 17-month high amidst the backdrop of political uncertainty in the UK and Italy. The US Dollar index is currently pegged at 97.405 after three consecutive strong sessions bring the index to levels it has not seen in over 16 months. At the same time the Euro composite witnessed three days of sharply lower pricing with today’s price falling approximately 1% as did British Sterling following their recent bearish trend.

Last week’s FOMC meeting which confirmed the current rate tightening path has seemed to have drawn investors back into the US dollar. The US is currently seen as having stable leadership when compared to the political uncertainty that plagues both the EU and Britain. Valentin Marinov, head of G10 FX strategy at Credit Agricole, said, “Euro and pound are both hurt by political risk and that is aggravating underperformance versus the dollar,”.

The strong US dollar is once again in the forefront of factors dictating gold pricing accounting for approximately 90% of today’s move in gold. Currently gold is sitting at $1199, according to the Kitco gold index buying in the market has had a mere $.30 positive effect on the price of gold with the dollar dragging pricing down by $9.80 the combined changes equating to gold trading lower by $9.50.

On a technical basis the dollar has major resistance sitting at around 97.85 which is the .618% retracement with support at approximately 96.00. If gold continues on its path and trades and closes above 98.00 it won’t face much resistance until 99.00 on a technical level and could go even higher.

With gold futures (Dec.) breaking below key levels last Friday including the 50- and 100-day moving averages it is key that it holds above the psychological support at $1200 per ounce. If it is unable to do so there is no real technical support until $1178 right at the lows reached in August as well as the 78% retracement.

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Wishing as always, good trading,

Gary Wagner