Dollar Fan?

Ah, the beloved U.S. Dollar. There is a dollar fan here. No, not me, the fan above, or more appropriately, the Pitchfan.

What the heck is a Pitchfan? It's a combination between a pitchfork and a Gann Fan. It also can be used to get an idea about the velocity (or acceleration) of a price move.

For example, the dollar has been caught within the -1.000 level pretty much since the end of 2010.

This level, or band, is pretty wide and it has taken the dollar a pretty long time to move anywhere near the top of it.

I suspect the next band labeled -0.750 is going to offer some stiffer resistance to the dollar price moving higher. Why? Well, the dollar tried to cross above that level back in 2010 and 2011, but never could stay above it for any significant length of time.

It also doesn't appear to offer much support either. It appears that in the past when price has neared the -0.750 level it moved down through it fairly quickly.

Another thing I see as a challenge for the continued move higher in gold is the developing divergence between the U.S. Dollar Index (DXY) and the Commodity Channel Index (CCI). You can see each there was a divergence between the CCI and DXY (black line slopes down on CCI indicating weakness while DXY climbs higher as marked by lines sloping upwards), the dollar ultimately moved lower. You can read more about the dollar divergence at Dollar Divergence: Is Momentum Weakening?

One other thing about the above chart - I think the dollar price needs to convincingly move above the upper parallel line of the Schiff Pitchfork or risk reversing lower, at least temporarily.

It's difficult to put a time on when the dollar might move lower.

I believe a large part of the dollar's move higher owes to economic stress worldwide, but especially in the Eurozone. There is a lot of money looking for a "safe" (or at least somewhere perceived as safe) place to be parked. The U.S. Dollar is attracting this money seeking the proverbial safe haven.

So, all of that money sloshing around seeking a safe haven makes things, like always, a bit unpredictable.

However, unless the Commodity Channel Index turns back up and rises above the black resistance line to match the upward track of the dollar, I would expect - at some point - the dollar has to take at least a little breather.

Bottom Line:  Undoubtedly the dollar can go higher. Expect resistance in the area marked -0.750. Also, at some point the dollar divergence with the CCI should resolve. Unless the path of the CCI changes, it should resolve with a dollar move lower, even if it is only a short-lived move.

Postscript: On a weekly basis the dollar is looking a bit stretched - not that it can't go higher, but RSI has reached at or near levels not seen since 1997. Even a drop in RSI, as you can see from past history doesn't mean the dollar will drop for long. If the dollar can make a strong weekly close above $92.63, it could continue to advance in a similar manner to the 1990's to 2000's dollar advance. In fact, the dollar would only need to make it to the -0.382 level to have a shot at equaling the DXY level of  of the early 2000's.