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VIX: Volatility Hints at Subsequent Transfer in Gold, US Greenback & Shares

VOLATILITY SET TO DRIVE GOLD PRICE, US DOLLAR & STOCK MARKET

The VIX Index appears precariously set for a significant break and can seemingly foreshadow the following flip in gold costs and the inventory market Foreign exchange volatility has surged just lately and certain helped propel the US Greenback to contemporary highs Try these Prime Buying and selling Classes to study from and keep away from frequent errors made by merchants

Two weeks in the past, we famous how gold costs and volatility dropped whereas shares climbed as US-China commerce battle jitters ebbed. The identical theme seems to have repeated itself during the last 5 buying and selling days with markets whipsawing in response to the newest US-China commerce battle rhetoric flip-flopping as soon as once more. In consequence, merchants seemingly discover themselves missing conviction over the market’s subsequent path whereas the mud settles in response to current elementary developments. Nonetheless, the VIX Index and different numerous measures of volatility stand to function a bellwether to the following transfer in gold, the US Greenback and shares.

VIX INDEX PRICE CHART: DAILY TIME FRAME (AUGUST 27, 2018 TO AUGUST 30, 2019)

VIX Index Price Chart Volatility Technical Analysis

Chart created by @RichDvorakFX with TradingView

On steadiness, the current stoop within the VIX Index alerts danger urge for food creeping again into the inventory market. The uneven reversals in volatility during the last month have largely been in response to the newest US-China commerce battle headlines which have shifted backwards and forwards between tit-for-tat tariff threats adopted by reviews that tensions are cooling as talks resume.

But, the VIX Index could very nicely pivot again increased with buyers’ favourite fear-gauge hovering close to technical confluence round 17.5 which might maintain volatility elevated as market uncertainty lingers. This stands to maintain a lid in potential inventory market positive aspects shifting ahead, whereas additional proof of the VIX Index drifting decrease might accompany a breakout within the S&P 500 Index from its turbulent buying and selling vary all through August.

GOLD PRICE VOLATILIY INDEX PRICE CHART: DAILY TIME FRAME (SEPTEMBER 24, 2018 TO AUGUST 30, 2019)

Gold Price Chart GVZ Gold Volatility Index Technical Analysis

Chart created by @RichDvorakFX with TradingView

The previous week’s widespread drop in volatility was most observable in GVZ – Cboe’s 30-day implied gold worth volatility index. In distinction to the standard inverse relationship between volatility and the worth of danger belongings (reminiscent of shares within the S&P 500 Index), spot gold costs have a tendency to carry a powerful optimistic correlation with volatility.

In flip, the steep slide in GVZ over the previous couple of buying and selling classes has thus far served nicely at foreshadowing current sluggishness within the worth of gold because the breakout in XAUUSD stalls. If elementary winds shift again in favor of danger aversion, nonetheless, that would bode nicely for volatility and gold costs.

US DOLLAR & CURRENCY VOLATILITY INDEX PRICE CHART: DAILY TIME FRAME (AUGUST 01, 2018 TO AUGUST 30, 2019)

DXY Index US Dollar Price Chart Currency Volatility Rises as Trade War Escalates

Chart created by @RichDvorakFX with TradingView

Turning to US Greenback worth motion, we discover that the buck has climbed to new multi-year highs alongside a pointy rise in foreign exchange volatility (measured utilizing an equally-weighted index of Cboe’s 30-day implied volatility readings on the Euro, British Pound and Japanese Yen). The US Greenback has largely loved a lift from America’s comparatively strong financial system – most just lately evidenced by wholesome GDP information – along with prevailing safe-haven demand.

With the Eurozone weakening additional and Brexit crippling the UK, FXVIX could churn increased which can present a tailwind for additional US Greenback upside – notably if the correlation between the US Greenback and foreign exchange volatility continues to develop extra optimistic.

— Written by Wealthy Dvorak, Junior Analyst for DailyFX.com

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