NYBOT Dollar Index

The dollar has come under pressure tonight and could be in for a test of May's key low at 72.70. If so, this would likely bring buoyancy to bullion prices in the days ahead, and perhaps more.  A target that I've identified for the NYBOT Dollar Index implies the selling could bring this vehicle down to 72.04.

The dollar is getting driven sharply lower at the moment, presumably bound for a Hidden Pivot support at 73.17 that can be found on the hourly chart. (A=75.10 on July 21).  If that number gives way easily, look for more slippage over the near term to as low as 72.04.

The dollar has plummeted these last two days, fueled in part by Moody's toothless threat to "review" America's credit rating. The collapse has come from a top that fell  0.46 points shy of a major target, but not before DXY generated a bullish impulse leg on the higher-level intraday charts.  A further decline breaching the 74.12 low recorded on July 3 would hint of a long, trendless stretch ahead, since it would create "dueling" impulse legs on all charts below the monthly.

Was yesterday's spike top the dying lunge of a bear rally begun in early May?  It's possible, since the intraday high came within 0.46 points of an important target at 77.18 shown in the chart.  However, the bullish case deserves deference here, since the peak, even though it failed to hit the target, generated a bullish impulse leg of significant degree when it exceeded a 76.61 high from early April. We'll know more once we've seen whether buyers are feisty enough to take on some small "external" peaks going back to mid-March.  (Tired of having to blindly follow some guru? Click here to learn how to forecast like a pro.)

We'll keep an eye on this vehicle in case it tries something sneaky, but the bigger picture -- one of dueling impulse legs -- hints of yet more consolidation in the weeks ahead. To be sure, the overall look of the chart is bullish for at least the intermediate-term; however, the failure of point 'B' to surpass the 76.61 peak recorded four months earlier hints that any breakout from the pennant is destined for mediocrity, not greatness.

There they go again! While we can view this rally with skepticism, in the end we must judge it solely by how many prior peaks it surpasses on the daily chart without taking a breather. As you can see, a mere thrust of 1.23 points would get DXY past no fewer than one 'internal' and two 'external' peaks, signaling that the uptrend has gotten beyond the booster stage. We should know soon enough...

DXY appears to be consolidating above the 75.35 midpoint of a bullish pattern on the hourly chart projecting to as high as 77.18. If a move to that number is indeed under way, it would exert pressure in the weeks ahead not only on gold and silver, but on stocks. We should therefore monitor this vehicle closely. Most immediately, a print today exceeding the 75.85 'external' peak on the hourly chart (see inset) would further embolden bulls and put more short-squeeze pressure on bears.

Pushed below 75, the Dollar Index has grown increasingly nasty toward bears, with Whoopee Cushion rallies interrupting the decline each step of the way.  Although I am still calling for a major decline to at least 68.36, it's not going to be an easy ride for shorts, since the lower the dollar goes, the closer the world's financial system moves toward the inevitable Day of Reckoning. Fortunately, and in any case, it will be virtually impossible for this vehicle to take us by surprise if we simply watch for the creation of a bullish impulse leg on the hourly chart that would warn of a significant trend change.

Bears appeared to struggle for yardage, and although there are no compelling downside targets at first glance, a serviceable one at 73.40 comes into focus if you extend the downtrend with an imaginary line. Beware, however: If buyers can push this vehicle above the tiny look-to-the-left peak at 74.83 shown in the chart, they'll likely come flying out of the gate when trading resumes on Sunday.