NYBOT Dollar Index

The Dollar Index came down hard Friday after a powerful four-day rally from within a hair of a 76.15 Hidden Pivot support. This has created "dueling impulse legs" on the hourly chart, and although that's often a harbinger of indecisive action, in this case the bulls still hold a slight edge. That's because the bullish impulse leg was more powerful than the bearish one that has developed so far.  The balance would tip back toward bears, however, if DXY were to dip below 76.40 today.  The rally from 76.12 stood to be an important one (see archive), but the major trend is still bearish.

Yesterday's low came within 0.24 points of a 76.15 target flagged here a while back. A tradable rally should unfold from these levels, but the bigger picture yields only evidence of further decay to come.  Two targets to keep in mind once 76.15 is breached are 74.44 and 74.08. They come from larger bearish patterns of different degree, and the two together should exert a magnetic pull. _______ UPDATE ( Sunday night): DXY came even closer to the 76.15 target on Friday, making a low at 76.28.  Accordingly, camouflage entry opportunities should be pursued aggressively here -- at the moment, perhaps by leveraging the look-to-the-left peak at 76.51 (see new chart).  _______ FURTHER UPDATE (March 8, 2:17 a.m.):  This pup has launched from a low of 76.12(! ) If any subscribers took the trade, please let me know in the chat room so that I can establish a tracking position for your further guidance.

Both major and minor downthrusts have consistently failed to produce Point 'B' lows that exceeded some obvious external low.  That is the same as saying they have been "sausage," with the implication that any bearish targets derived thereof will not be as reliable as those produced by "legitimate" impulse legs.  That said, the visual logic of the pattern shown yields a passable target at 76.15, and it is that Hidden Pivot that I will suggest using as a minimum downside objective for the near term.

There are three peaks not far above, and if and when they are tested by a surge in buying, we'll know just how much guts this rally's got.  My hunch is that November's 81.44 high will endure for a long while, but we won't make any judgments until we've seen whether buyers can surpass one peak, or two, or perhaps all three without generating any b-c corrections on the daily chart.

Someone in the chat room mentioned seeing something unusual in the daily chart, but I can find nothing of interest myself.  Although I am hard-pressed to come up with reasons why the dollar should remain more or less stable for an indefinite period, 'dueling impulse legs' on the daily, weekly and monthly charts suggest that the picture could remain boring for weeks or even months.  While a breakdown below 70 seems unlikely any time soon, it would take an upthrust exceeding 92.63 to end the bear market begun nine years ago.

Tuesday's weakness smashed two of the three bearish targets given, so we'll assume that the third, 76.62, is dead meat.  Because the downtrend is displaying such vigor, I've used a 240-minute chart to determine how much power might remain.  The pattern shown projects to 74.08, and that is the number we shall use as a minimum downside objective, looking out perhaps 8-12 days.  However, if this forecast is going to be literally upended, it will be signaled by a breakaway thrust above the 77.76 midpoint.  We will naturally want to keep a close eye on that number in the days ahead.

Currency traders will have the wind at their backs for perhaps a couple more days, since the Dollar Index looks likely to fall to at least 77.26 over the near term.  Two other targets just below that Hidden Pivot lie respectively at 77.05 and 76.62.  All are shown in the accompanying chart, but as you can see, there are a few more.  Each can be bottom-fished with a stop-loss as tight as four ticks.

The bearish pattern shown in the chart is sufficiently clear that DXY's interaction with the 77.47 midpoint pivot should tell us what the dollar is likely to do in the weeks ahead.  There should be a tradable bounce, and a precise one at that, but because it has taken the downtrend nearly five months to get there, any decisive breach of the support within the next few days, especially on a closing basis, would be akin to the groundhog seeing his shadow:  six more weeks of winter).

At first glance, the Dollar Index appears to be consolidating for a push to 82.25, a prospect that would put gold and silver quotes under pressure for perhaps 2-3 weeks if the rally commences soon.  While I wouldn't recommend impeding the rally too aggressively with short offers, it's worth noting that the B-C consolidation that would ostensibly enable DXY to reach 82.25 has followed a point 'B' high that narrowly failed to take out the look-to-the-left peak highlighted in the chart.  This suggests that even if the Dollar pops and makes it to 82.25, the rally should be seen as gutless at its core. The further implication is that this is no nascent bull market taking shape in the dollar, but rather a garden-variety bear rally that has drawn all of its strength from not unreasonable fears that Europe is headed toward collapse.