NYBOT Dollar Index

Fair-weather fans of the dollar should be encouraged by its recent price action. DXY appears to be consolidating at the 'p' Hidden Pivot midpoint of the bullish pattern shown, since much of the oscillation has occurred above it. If and when this number is decisively exceeded, look for the thrust to carry to its 'D' sibling at 84.85 straightaway.

The presumptive consolidation from Friday's highs has proceeded without tripping any false buy signals on the three-minute chart. What this suggests is that traders can and should use this chart to spot the subtlest sign of a breakout reversal. In this technical environment, the first AB impulse leg that occurs seems likely to take you to the CD midpoint, at least.  Bear in mind that the single-bar 'C' in this instance will yield the best trade set-up we might look for. Upside potential is to 83.32, or 83.75 if any higher. _____ UPDATE (11:18 a.m. EDT): The suggested trade would have been profitable, although staying aboard for an even bigger rally that came later would have taken patience.  Sticking to the single-bar 'C' rule got one long at exactly 82.97 at 4:57 a.m. EDT. Contact with the midpoint, and therefore an opportunity to take profit on half the position, occurred about 18 minutes later. FYI, the single-bar 'C' was at 4:39 a.m.

This week's consolidation has occurred entirely below an 83.03 peak recorded on July 23, so the potency of the larger, bullish pattern begun on August 6 is suspect. It projects to 84.30, but because the pattern itself is sausage-y, we should assume for starters that more consolidation is needed before much of anything happens for bulls.

The dollar's fall in the face of trans-Europe's austerity pledge has been a no-brainer so far, but how far will it go? Judging from yesterday's price action, the answer is: much lower.  Doug McLagan hung out a bearish target at 80.98 here a couple of weeks ago, and DXY got there yesterday with a steep plunge. But it went lower still, and the intraday low of 80.79 hints of more ferocious selling to come. If so, a Hidden Pivot at 79.27 makes a logical target, since it's based, simply, on a higher point 'A' (see chart) and the same beautiful B-C.  Alternatively, it would take an upthrust exceeding 82.38 by Wednesday to turn the hourly chart around.

Yesterday's decline in the dollar confirmed a new daily pattern projecting as far down as 80.98, which would be a three-month low.  The dollar's peak on June 7 coincides, not surprisingly, with the important Euro low of the same day, and the two currencies have been trending strongly in opposite directions since then.  The midpoint of the dollar's pattern (82.22) is above the low for the move (82.08), which is also the "B" point of our pattern.  Therefore a bounce off the midpoint would look like a successful retest of the low followed by a potential trend change.  However, if the midpoint is surpassed, Hidden Pivot analysis tells us to expect the "D" target to be reached.  This would most likely correlate with the Euro breaking through its resistance level.  (Posted by Doug McLagan)  _______ UPDATE (1:57  p.m. EDT): The dollar index bottomed one tick below the 82.22 midpoint and then rallied sharply.  The September dollar index futures, whose price levels are offset slightly from those of $DXY, also bounced from a penny below its corresponding midpoint.  The rally was good for more than $800 per contract. _______ UPDATE (March 20):  Yellen's speech yesterday sent the dollar soaring. She did not say anything intelligible, let alone meaningful, and so one might infer that the dollar's reaction was -- as usual -- based on delusions and hallucinations long cherished by the mindless herd.

Friday's low at 82.08 fell within 0.08 points of minor Hidden Pivot support that so far appears to be doing its job. The bounce will have to clear 83.51 to look like the beginning of a real turnaround, however, and my hunch is that it will fail. I don't usually cite "fundamentals," but in this case European intimations of "austerity" should suffice to put a lid on the dollar, even if it's "too-big-to-fail" appeal will likely remain as a rationale for more than a mere handful of institutional lemmings.

DXY fell yesterday to within 0.41 points of our target, a Hidden Pivot at 82.80 that has the potential to produce a very tradable swing low.  There are many ways to play the turn if it comes, and so I am proffering the target for your discretionary use. If DXY thrusts above 83.77 before touching 82.80, it would imply a strong (but possibly brief) rally immediately ahead. ______ UPDATE (12:22 a.m. EDT): DXY's obliviousness to the hidden support suggests yet more weeks, or longer, of weakness ahead.  The next test will be of a minor support at 82.16, so let's see how it goes.

If you can contrive to ignore the nasty irregularities of the B-C leg, an 82.80 downside target looks like a piece of cake.  That Hidden Pivot can serve as our minimum downside objective for now, but please note that if it's hit, that would refresh the bullish impulse by exceeding the key May 10 low at 82.91.

June's three-week slide is bearishly impulsive on the daily chart, but there's not enough clarity on the intraday charts to map out the swing lows DXY is likely to carve out on the way down. My guess is that the next big leg will achieve a minimum 83.86, an approximately 2.3%  fall from these levels.  If so, the crucial midpoint support lies at 85.14, and a bounce off it would tend to corroborate the target itself.  _______ UPDATE (9:58 a.m. EDT):  DXY has bounced from 85.21 -- close enough to the midpoint support for us to infer that the Hidden Pivots are working.  A decisive breach of 85.14 should therefore be regarded as a warning of an imminent fall to 83.36.