It is now becoming mainstream that the dollar’s drop signals an increase in risk taking and a bid under commodities since they are denominated in the greenback.
Rumors running rampant of the dethroning of the dollar and only 2% of dollar bulls (includes me) signals to me that the trade on the short side is extremely crowded. Any positive catalyst on the currency could have quick and severe reversion to the mean, which would translate to large corrections in the commodity and stock markets.
The support level to be fixated on is 76.00 on the DXY, followed by 74.00 if indeed it does break. It seems that we are headed right for 76. A successful bounce from here would probably signal weak commodities once again and would constitute a double bottom (bullish sign).
One of the characteristics of the market is that it tends to go against the consensus. Even though it is all subjective, it seems to me that this “end of the dollar” fear is reaching a climax and a reversal is very possible upon the slightest hint of bullish news regarding the dollar (be it subpar economic reports, China, anything really). That’s how it happened at the March lows. Everyone thought that Armageddon was before us with the economy. Now it seems that Armageddon is here with the devaluation of the dollar.