The US Dollar is sending a loud and clear message: it’s in trouble. After failing to reclaim a critical resistance zone, the dollar is now in freefall, with bears pushing for another steep decline. This isn’t just a minor setback—it’s a significant shift that’s rippling across global markets. But here’s where it gets even more intriguing: while the dollar weakens, gold is seizing the moment, breaking through major resistance levels with surprising strength. Today’s focus? Watching whether the dollar’s downward spiral continues—because as long as it does, precious metals like gold and silver remain firmly in control.
USD Index (DX.F): Bears Take the Wheel
Let’s rewind to a key insight from January 14th (Lab Note #71):
“Friday’s failed attempt to break above the rising channel’s upper boundary also meant a failed breakout above the 61.8% Fibonacci retracement. Bulls couldn’t close the early-December gap, and with indicators like Stochastic signaling a sell and CCI deep in overbought territory, the dollar’s next likely move is downward—toward the targets we discussed.”
Fast forward to today, and the daily chart confirms our fears. Despite multiple attempts, bulls couldn’t close the gap, triggering a sharp bearish reaction. Yesterday’s session opened with a glaring downside gap, and fresh sell signals gave bears the green light to execute the scenario we outlined on January 12th (Lab Note #67):
“If sellers regain control and close below the channel’s upper line, their first target is around 98.53. A break below that could expose 98.26, or even the channel’s lower boundary.”
And the market delivered. Sellers drove DX.F down to 98.09, briefly dipping below both targets. While we saw a rebound later, Wednesday opened with another downside gap, suggesting another leg lower is imminent. The first target? A retest of yesterday’s low. If bulls don’t intervene, the next stop is the major support zone around 97.41–97.64, based on the October 6, 2025 gap and the 61.8% Fibonacci retracement. This zone already halted sellers twice in December, so it’s one to watch closely.
USD Index (H4): Breakdown Confirmed
Recall another insight from January 14th:
“Two failed attempts to break above the channel suggest the dollar may retest the 98.50 support zone soon.”
On the H4 chart, bulls briefly climbed above 99, but the resistance from the black rising channel and the red zone proved too strong. After days of consolidation, buyers lost steam, and bears took over. The latest decline pushed the dollar below the channel’s lower boundary, meaning any bounce is likely a corrective move within a broader bearish trend—unless this breakdown is invalidated. While H4 indicators flashed early buy signals, the daily gaps and the dollar’s position below the channel keep bears in control.
So, what does this mean for gold?
Last week’s analysis proved spot-on:
“Despite the dollar’s rise since the year began, gold and silver haven’t weakened. The correlation between USD and metals has actually strengthened, not weakened. This doesn’t mean the relationship is broken—just that metals aren’t reacting negatively to a stronger dollar. Analyze gold and silver on their own charts, but monitor the USD-metals relationship.”
And now, the classic relationship is reasserting itself: a weaker dollar is fueling metals, giving bulls the momentum to push higher. But here’s the controversial part: Is this correlation here to stay, or could it flip again like it did recently? Keep an eye on it—as long as it doesn’t reverse, dollar weakness remains a tailwind for gold and silver.
Gold (GC.F): Bulls Break Resistance—and Then Some
In yesterday’s note, we highlighted:
“Early bearish divergences are appearing on H4 indicators, but no sell signals yet. The door is open for further upside, with the next target at 4768-4780. A break above that could bring 4800 into focus.”
Bulls didn’t just clear that resistance—they surged decisively above 4800, strengthening the short-term bullish case. For those tracking the next move, the Premium Lab Notes outline the broader framework, including key levels and risk parameters.
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Lab Takeaway
Today’s playbook is straightforward: the USD Index is the trigger, and gold is the reaction. As long as the dollar stays below its broken channel and those red gaps remain open, metals can keep rallying. But if the dollar starts reclaiming key levels, gold’s rally could stall fast. And this is the part most people miss: the USD-metals correlation isn’t set in stone. What if it flips again? Could gold’s gains be short-lived? Let us know your thoughts in the comments.
Stay patient, respect the levels, and let the market reveal its next move.
Anna
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About the Author
Anna is a lifelong trader and market enthusiast who has analyzed thousands of charts from around the world. Her insights have been featured on industry-leading websites in the USA, Canada, and Great Britain.
