Short-Term USDOLLAR/Gold Relative Strength Analysis
The top chart below shows the H4 relative strength ratio between FXCM's USDOLLAR basket and gold (XAUUSD). The ratio started to fall last week Wednesday (blue dashed vertical). I.e., the greenback was declining against the precious metal. The catalyst here was the spread of the omicron variant, and gold's regard as a safe haven. We do note that the EMAs and stochastic are rolling over (red ellipses), which may suggest further downside for the ratio. However, yields will have a bearing on just how far the decline will be. The lowest chart is the US10 yr treasury yield. Yields declined at the same time that the ratio fell (between the blue and red dashed verticals). This makes sense as the dollar lost its pricing support and gold's opportunity cost decreased as yields came down. We note that the Fed's hawkishness most likely places a floor and just how low the ratio can go, and in this regard the US10 Yr yield has started to appreciate (green rectangle). If this continues, the dollar will be supported and the precious metal's opportunity cost will increase.
Source: www.tradingview.com
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Russell Shor
Senior Market Strategist
Russell Shor is a Senior Market Strategist at FXCM, having been promoted to the role in 2025 in recognition of his depth of insight and consistent delivery of high-impact market analysis. He originally joined FXCM in October 2017 as a Senior Market Specialist.
Russell holds an Honours Degree in Economics from the University of South Africa, is a certified FMVA®, and a full member of the Society of Technical Analysts (UK). With over 20 years of experience in financial markets, his work is renowned for its clarity, precision, and strategic value across asset classes.
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