Followup of my last chart to get more into the details of 1130 support line and why I bought gold today.
Why is 1130 support so important?
Lets first look at Dollar Index. More specifically at 7/11/2014.
Gold price reversed, however USD did not. USD continued to rise without change and this divergence continued for almost 3 months.
Normally, when USD goes up, Gold goes down and vice versa when Gold goes up, USD goes down.
But when Gold and Dollar go in the same direction, that's what I call a true divergence. This type of divergence is pretty significant for many reasons. It suggests that 1130 support is Gold driven, not Dollar driven (You can't say the same for Gold reversal point 2015/03/17 for example).
On the other hand Dollar is overbought and ranging at it's peak waiting for reversal. When gold is looking to go up and dollar is looking to go down, XAU/USD has a potential to skyrocket.
Waiting for confirmation is usually a routine, but not in this case, not in my book. The support line is strong here and dollar is peaking making risk/reward extraordinary. The gold is already 0.2% up since my entry. This of course means nothing as the price may fluctuate for months before the liftoff, but I don't see gold going far bellow 1130.
In worst case scenario Dollar Index may continue up keeping the Gold in range around 1130.
Why is 1130 support so important?
Lets first look at Dollar Index. More specifically at 7/11/2014.
Gold price reversed, however USD did not. USD continued to rise without change and this divergence continued for almost 3 months.
Normally, when USD goes up, Gold goes down and vice versa when Gold goes up, USD goes down.
But when Gold and Dollar go in the same direction, that's what I call a true divergence. This type of divergence is pretty significant for many reasons. It suggests that 1130 support is Gold driven, not Dollar driven (You can't say the same for Gold reversal point 2015/03/17 for example).
On the other hand Dollar is overbought and ranging at it's peak waiting for reversal. When gold is looking to go up and dollar is looking to go down, XAU/USD has a potential to skyrocket.
Waiting for confirmation is usually a routine, but not in this case, not in my book. The support line is strong here and dollar is peaking making risk/reward extraordinary. The gold is already 0.2% up since my entry. This of course means nothing as the price may fluctuate for months before the liftoff, but I don't see gold going far bellow 1130.
In worst case scenario Dollar Index may continue up keeping the Gold in range around 1130.
