Is The Dollar Ready To Go Back Down?

The Dollar has been trending down since December 2005 but has been moving higher over the last several weeks establishing what I believe to be a pullback within a down trend. A Pullback always gets my attention providing there are reasons for a market to once again resume its trend.

If you look at the chart above of the U.S. Dollar, you will notice the dollar tends to make significant highs approximately every 3 1/2 months. In the lower panel are the stochastics which are in the overbought zone right now. Overbought readings above 85 usually coincided with significant tops in the dollar. I think a move below last weeks low would confirm that a top is in and that the dollar should retest the lows from last December.

What's been so interesting lately is that commodities such as gold and oil have been trending higher with the dollar. If the U.S. dollar does indeed sell off, we may see more of an acceleration to the upside in oil and especially gold since gold is breaking out right now.