Dollar Rebound Weighs on Gold as Bear Pennant Forms

The US dollar has regained its strength, rebounding after a period of weakness. The DXY index has reclaimed the 200-day moving average and the 38.2% Fib retracement of the January to June bull move.

This rebound is closely tied to rising front-end US yields, which have pushed higher following Kevin Warsh's hawkish speech at Jackson Hole last Friday. The correlation between DXY and two-year yields has increased to 0.87, hinting that further dollar upside could be on the way.

The strengthening dollar has weighed on gold prices, which are currently consolidating within a narrowing range below $4,450. A bear pennant formation is developing in the price chart of XAU/USD, warning of potential renewed downside pressure.