DOLLAR TRIANGLE LOOKS READY TO BE RESOLVED ON DOWNSIDE -- EURO HITS NEW RECORD TODAY AGAINST DOLLAR -- GOLD STOCKS APPEAR READY TO RESUME THEIR BULL TREND

DOLLAR TRIANGLE LOOKS BEARISH ... A few weeks back I wrote that the U.S. Dollar Index could be on the verge of an intermediate-term rebound. That's no longer the case. The daily bars in Chart 1 show that the USD has been forming a triangle since its December low. The triangle is defined by the two converging trendlines. A break of the lower line would signal a likely resumption of the dollar downtrend. Chart 1 is plotted through yesterday (Monday). However, the dollar is dropping against all major foreign currencies today. Most importantly, Chart 2 shows the Euro Index touching a new record high today after trading sideways since late November (like the dollar). Since the Euro has the biggest weighting in the Dollar Index, today's upside breakout is bearish for the greenback. Another factor working against the dollar is the recent surge in commodity prices, especially gold. Since they normally trade in the opposite direction of the dollar, their uptrend argues for a continuing dollar downtrend.

Chart 1

Chart 2

GOLD STOCKS READY TO RESUME ADVANCE... Another factor working against the dollar is that gold stocks appear ready to resume their uptrend (bullion already has). I recently wrote that the Market Vectors Gold Miners ETF (GDX) was completing a bullish triangle (see converging lines). In an uptrend, a triangle is a bullish pattern. [A triangle will usually be resolved in the same direction as the trend prior to its formation. That's why the dollar triangle is bearish]. Chart 3 also shows that the GDX has been trending sideways for the last four months. That looks to be just a flat consolidation pattern within an ongoing uptrend.

Chart 3