Precious metals flash powerful reversal signals as a stumbling U.S. dollar opens the door to a major trend shift.
While the U.S. dollar is showing signs of fatigue below key resistance, precious metals have responded with a series of bullish gaps, breakout invalidations, and improving momentum signals. Several markets are now testing critical technical levels that could determine whether we're looking at a short-covering bounce or the beginning of a larger trend reversal. As always, the next few daily closes may matter more than the intraday noise.
U.S. Dollar Index (DX.F)
On Friday, buyers once again tried to reclaim the key 100 level and close Friday's bearish gap (99.76-99.85), but they came up short. The dollar finished below 100 for the fourth consecutive session, leaving that gap wide open and sending another warning sign to bullish traders.
Those repeated failures around 100 weighed heavily on market sentiment and helped trigger a fresh bearish gap at the start of the new week (99.20-99.74). On top of that, daily indicators have now generated sell signals, increasing the risk of further downside pressure in the sessions ahead.
The good news for bulls is that today's decline brought the greenback directly into an important support zone built around the bullish gap from early June (99.18-99.26). This area has already proven its value several times by stopping previous bearish attacks. It is now reinforced by the 38.2% Fibonacci retracement, creating a potentially strong platform for a counterattack.
However, traders should keep one important fact in mind: buyers still have plenty of work to do. Two bearish gaps remain overhead, and the previously broken green support line is now acting as additional resistance near 99.50.
Therefore, our view remains straightforward: as long as the dollar stays below 99.85, bears continue to hold the stronger technical hand. A daily close below 99.18 would likely open the door to another leg lower, while a recovery above 99.85 would be the first meaningful sign that buyers are finally regaining control.
Palladium (PA.F)
Let's start with Friday's quote:
“(…) The bullish scenario based on the double-bottom pattern - pointing toward at least the 1336 area (…)”
From today's perspective, we can see that the market followed our bullish scenario almost perfectly. Buyers not only confirmed the previously discussed double-bottom formation, but today's session also opened with another bullish gap (1296-1317).
That gap pushed palladium back above the previously broken March low (1315), creating yet another invalidation of an earlier breakdown. When we take this fact into account and combine with both bullish gaps (today's 1296-1317 and Friday's 1249-1285), the island reversal pattern, the confirmed double bottom, and fresh daily buy signals, we see that bulls suddenly have several powerful technical arguments on their side.
So, where could they go next?
Their first challenge will likely be the late May – early June resistance zone built around the bearish gap from May 26 (1388-1430), which has repeatedly rejected bullish attempts.
The battle there should tell us whether buyers are finally ready to challenge the descending red trendline currently sitting near 1470.
Today’s Takeaways
For Dollar (DX.F)
- Watch 99.18 & 99.85 because the market is trapped between very important support and even more important resistance.
- Break above 99.85 -> opens the door toward 100.00-100.36.
- Daily close above 100.36 -> confirms bullish continuation.
- Break below 99.18 -> increases the odds of a move toward lower support levels.
(…)
For Palladium (PA.F)
- Watch 1296-1317 because the market is transitioning from recovery to trend-reversal territory.
- Hold above 1315 -> keeps the double-bottom scenario alive.
- Break above 1430 -> opens the door toward the red declining trendline near 1470.
- Daily close below 1315 -> weakens the bullish case and increases the risk of another pullback.
Stay patient, respect the levels, and let confirmation lead the way.
Anna