NYBOT Dollar Index

Since summer, bulls and bears have been locked in a duel that looks like a draw at this point. That could change, however, if DXY dips below the red line at 79.65, a midpoint Hidden Pivot support that is crucial to the short-term (or possibly longer) outlook.  A decisive breach would augur more downside to at least 77.81, an event that would generate additional, impulsive downforce by exceeding yet another important low key at 78.10.

The Dollar's weekly chart (a blended composite is shown) evinces no great weakness or strength, although the immediate picture is bullish because of the so-so impulse leg created by the rally from the October 25 low. (The move has surpassed one 'external' peak but no 'internals'.)  However, were the rally to continue, surpassing the 83.150 peak without a 'b-c' retracement, that would turn the weekly chart quite bullish, but the implication would be less so if it takes a pullback and a running start to do the job.

The long-term chart shown is intended to remind you that no matter what kind of hyperventilated talk you hear about the supposed Death of the Dollar, it is actually trading near the midpoint of a go-nowhere range that has obtained for nearly ten years.  Asked to hazard a guess concerning the direction of the next big move, up or down, my answer would be, "Why bother?"

The dollar's weakness versus the euro in recent weeks seems bizarre only if you imagine that it will continue. My guess is that the relationship is about to reverse, demonstrating yet again that the swings of the dollar and the euro over the last year-and-a-half have been gratuitous and technically driven. Notice that the selloff that followed July's 84.75 peak, although fairly steep, was not vertical. One might have expected worse, given the viciousness of the trap sprung on bulls just a few deceptive ticks above May's high. Instead of falling apart, however, the dollar merely stairstepped lower after a wicked two-day downdraft. The process has continued, becoming more labored over the last two weeks as sellers' potency has waned.  Now, my guess is that DXY is about to fake out bears with a feint beneath June's 80.50 low before turning higher with the same energy that sent it tumbling in July. _______ UPDATE (September 3): The dollar is up about 2 percent since the forecast above first appeared, although the rally did not require a fake-out beneath 80.50 to get going; the actual low was 80.75. Now, with just a small push above 82.49 (an 'external' peak recorded on 8/2), buyers would refresh the bullish energy of the hourly chart.

The Dollar Index has spent the better part of July consolidating a 5% rally and now looks ready for a follow-through thrust. Notice that a 'buy' signal was tripped on Friday when DXY exceeded 'x' by two cents. That implies that traders should position from the long side. Next, a crucial test for bulls will come at 83.53, the midpoint resistance of the pattern shown.  An easy move through it would imply that this is indeed a major rally in the making, with potential to hit 85.66, at least.

The thing to notice about the U.S. dollar right now is that there is not much to notice (see inset). It would be accurate to say that it has gone nowhere in more than eight years, notwithstanding some whipsaws in either direction. More recently -- meaning the last four years -- it has been mostly treading water and currently sits around the middle of the range.  That is not to say it couldn't break out of the range on the next big move; however, whatever is coming, there is nothing in the charts that suggests a dollar cataclysm. I mention this only because it has always been a given that when the financial system collapses -- as it eventually must, due to the yet-to-be-actualized implosionary force of a quadrillion dollar derivatives edifice -- the greenback will be in the thick of it at ground zero. The central banks may be able to control interest rates and other variables in the financial system, but there are far too many dollars to control if market forces should take hold someday, impelled by the epiphany of America's bankruptcy.

The dollar's weakness last week took some pressure off bullion, but will it last? There is promise in the strong impulse leg begun last Tuesday, but we'll have to see how the second phase of the downtrend interacts with the Hidden Pivot midpoint support shown in the chart (which is tentative at this point, since a new 'b' could form). However, if the selloff should reverse without having reached 'p', gold and silver bulls should prepare for a soft patch or worse.  ______ UPDATE (July 16, 8:32 p.m. EDT):  Monday's rally has shifted the crucial midpoint pivot slightly north to 82.31 (see inset, a fresh chart), but we should still expect it to tell us very clearly whether the dollar is headed significantly higher or lower over the intermediate-to-long term.  A decisive breach of this 'hidden' support would imply more downside to at least 81.15 (where we would incline toward cautious bottom-fishing in any event). Alternatively, a rally touching 83.12 that has begun from above 82.36 would imply that bulls are solidly back in command and eager to achieve new recovery highs.

The big picture still looks bullish, but the dollar was due for a rest after peaking two weeks ago within a hair of the 84.55 rally target shown. We'll need to monitor the pullback closely for signs of more-than-minor weakness (i.e., abcd corrective patterns that exceed their 'd' targets), however, since the apex of the last rally fell a tad shy of the 84.57 peak it needed to have exceeded to reresh the bullish energy of the daily chart.  _______ UPDATE (4:10 p.m. EDT): Today's weakness spells more trouble, although not necessarily the U.S. dollar's imminent demise.  DXY will now fall to at least 80.66, or to 80.19 if any lower. Both numbers are Hidden Pivot supports, and if they don't evince a discernible bouncem then look out below.

The dollar's latest rally is bullishly impulsive on the daily chart -- sufficiently so, perhaps, to re-energize the bull cycle begun in February from around 79. The  thrust from last Wednesday's low is also quite enticing from a camouflage perspective, since it failed to take out early April's "marquee" high at 83.49 after getting past the required 'internal' and 'external' peaks.  Although we don't trade this vehicle, we monitor it to buttress trades in other currencies. Under the circumstances, a buy signal at x would provide reason to short other currencies, and to brace for possible weakness in bullion. _______ UPDATE (May 15, 3:19 a.m. EDT): The rally tripped an entry signal at 83.38 off a pattern similar to the one shown. The target is 84.26, subject to midpoint resistance at 83.79. _______ UPDATE (May 17, 4:32 a.m. EDT): The most recent thrust brought this vehicle to within 11 cents of the 84.26 target noted above. This has given way to a consolidation and new bullish pattern that projects to 84.56 over the near term, provided the 84.01 midpoint can be surmounted. (See inset, a fresh chart.)________ UPDATE (May 29): A new rally target at 84.95 has emerged that's based on the pattern shown (a fresh chart, inset). _______ UPDATE (June 5): If bulls are to get traction, we should see this correction turn from very near the 82.03 Hidden Pivot midpoint shown in this new chart.