The year-long struggle the Dollar Index had getting past the midpoint resistance at 106.31 argues against giving it a free pass to the 113.02 'D' target that would complete the pattern shown in the chart. Even so, the way the rally picked up steam to pierce p2=109.66 as the week ended was impressive and suggests more headway toward the target is likely. We have still-higher targets outstanding, including one at 124.82 that I reiterated here last week. A middling resistance at 110.08, an inch above Friday's high, will also be shortable and warrants your attention. It is notable that the dollar's strength has not crushed gold, only hindered it. _______ UPDATE (Jan 18): A short from 110.08 as suggested would have caught the top of a nasty swoon. The low of the move did not quite reach a 108.40 correction target, and that is bullish. Look for a push above the recent high at 110.18 in the week ahead.
The Dollar Index has retraced slightly after pushing past the 109.30 Hidden Pivot resistance we were using as a minimum upside target. This has put into play the 112.20 'secondary Hidden Pivot' shown in the chart. Expect a tradable pullback from that 'invisible' resistance, but if it gives way easily, that would imply that bulls are fixing to take this symbol to D=124.82. Everyone should have noticed by now that the dollar's strength has not inhibited the long-term bull market in gold. It has been in a holding pattern, presumably developing thrust for the next phase of its ascent.
The Dollar Index pulled back hard on Friday, half-correcting the steep upthrust from two days earlier. Given how the uptrend impaled the midpoint Hidden Pivot (p=107.36), there is little room for doubt about whether D=109.30 will be reached. As noted earlier, that would keep weight on gold. It would also set up a potential 'mechanical' buying opportunity at p=107.36. We don't often do this trade at p, but the trend is so strong that waiting for a relapse to the green line (x=106.39) might leave us empty-handed when the turn comes. _______ UPDATE (Dec 28): The dollar has hovered stubbornly aloft, denying us an opportunity to bottom-fish at the red line (p=107.36). The trade recommendation remains viable nonetheless.
The Dollar Index is stealing up on a key Hidden Pivot resistance at 107.36 that is associated with a D target at 109.30. The pattern is clear and compelling, so we could be confident its target will be reached if buyers push past p with ease. That is what I expect, and it would have negative implications for gold, as mentioned in my update for the February Comex contract. Shorts at p and D can be attempted nonetheless, using any vehicle of your choosing that corresponds directly or inversely with the dollar.
The selloff from the 108.07 high recorded on November 22 has exceeded any minimum downside target I could have projected at the outset. Also, the high fell a whopping 91 cents shy of my 108.98 upside objective, and that is another reason I've given this correction wide berth with the big pattern shown and its 'locked' point 'a' high. The chart implies the downtrend is bound for a minimum 104.91, the pattern's midpoint Hidden Pivot support. Expect a tradable reversal from there, but if it is short-lived, or if the support is decisively penetrated on first contact, it could signal an important tone change in the bull cycle begun in early October. Since gold has been moving higher with the dollar, we might expect bullion's uptrend to accelerate if the greenback continues to fall.
DXY's sharp poke on Friday through p=107.55, the midpoint Hidden Pivot, implies the rally is very likely to reach the pattern's 108.98 target. This symbol is not optionable, but you can trade the futures contract by interpolating my targets. It is encouraging to see bullion strengthen with the dollar rampaging higher. Its potential on DXY's long-term chart is to 119.37, or 124.82 if any higher (monthly chart, A= 89.54 on 5/31/21). A move of that magnitude would put enormous strain on all who owe dollars, and a ruinous deflation would likely be the result. This would occur irrespective of the level of nominal interest rates, since it is the real (i.e., inflation-adjusted) burden of debt that matters, not the marquee number.
The Dollar Index didn't so much impale the 103.11 midpoint resistance last week as overwhelm it. This shortens the odds of DXY's achieving our 106.06 target (slightly revised) over the next 3–4 months. It is encouraging to see gold performing so well despite the pressure of a strong dollar, but also scary to imagine the implications this might hold for so deeply troubled a geopolitical world. A clear implication is that Treasury bonds and notes, not wildly popular lately, continue to be a promising place to secure one's savings. ______ UPDATE (Oct 27): Last week's steep rally pushed the Dollar Index toward the 106.06 target much more quickly than I might have expected. If bulls exceed it easily, you can be sure that a test of two important peaks near 107 that were recorded in the past year near is coming.
Last week's bounce was the most powerful in a year, but is it going anywhere? We could know soon, and with a high degree of confidence, depending on how the uptrend interacts with the 103.17 midpoint resistance shown in the inset. Although an easy move past it would imply more upside to at least D=106.12, that would leave the dollar merely level with a supply zone created by several peaks extending back nearly two years. A breakout above 107 would turn the weekly chart strongly impulsive, but we'll wait till it happens before drawing any conclusions. Here's a bigger picture to remind you that the almighty buck has been in a bull market for more than a decade, notwithstanding the Fed's best efforts to turn it into confetti. It is the only currency big enough to handle the global financial shell game, and it will always be in high demand for that reason, no matter what the BRICs and our many enemies are plotting against it. The chart shows upside potential to at least p=112.20 on the next breakout. ______ UPDATE (October 13): The rally stalled last week a tick above the 103.17 resistance noted above. Bulls need to do better to demonstrate their ability to push the Dollar Index up to at least 106.12.
The Dollar Index is breaking down following a six-week struggle to hold above 100. Support came more precisely at the 100.57 Hidden Pivot midpoint of the pattern shown, a nearly two-year downtrend that portends more downside to as low as 93.78. Since the dollar was barely able to hold the support with Powell unwilling to ease, it is logical for it to be weakening now that he has decided to go with the global flow. He can't possibly win the devaluation Olympiad, nor would he attempt it. But he has doubtless calculated that the dollar will not get kicked too savagely as long as so many other countries are trashing their currencies.
Sellers crushed the 102.4o downside target featured here last week, so I've substituted a longer-term chart with a more significant target at 93.79. We'll know better whether it is likely to be reached once we've seen how the midpoint support at 100.57 fares. It held precisely back in December, but I wouldn't bet on it to hold this time. If DXY trades significantly below it (i.e., 99.50 or lower), however, or closes below it for two consecutive weekly bars, that would make further downside to p2=97.18 an odds-on bet.
