Watch for a Dollar Bounce and Gold Pullback this Week

By John Galt

September 21, 2009

This one chart that I watched on Friday night told me the story and I think you will see a dollar bounce back up over the next 5-7 trading days:

uup0913MO

The gap will be filled on that chart as there is a high dollar bet on this bounce and the gap on the USD Index will also be filled:

usd3modailychart

That should bring the index back up to the 78.00 to 78.25 level test the 50 day moving average as now the upper level resistance and then roll over again and attempt to test the lows of 2008. A failure to fill this gap now would be a disaster for the dollar in the short term and could case an even faster breakdown in the dollar despite central bank intervention.

Gold should also retrace some of its gains as it is overbought at this point in time:

gld09181yr

As you can see in this one year chart above, gold based on the GLD ETF could easily drop down and test the rising 50 DMA then after that resume its move upwards to the next area in the breakout above $1050 ($104 on the ETF roughly).  This will be a turbulent week for commodities, equities and the bond markets as indicated by the money flows continuing to pile billions into the 1 and 3 month Treasuries.

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