Roll up, roll up folks for the "Great Dollar Turkey Shoot". You don't need a good weapon and you don't even need to shoot straight to be assured of a kill.

The dollar has had a lot of fun this week at the expense of the Euro, following the European elites being crass enough to ask the public for a mandate for their policies, and compounding their error by using quaint old-fashioned, honest, vote counting procedures - to their considerable embarrassment and the amusement of the US elites, who are much more sophisticated when it comes to handling elections and "counting" votes.

This European predicament has suddenly distracted attention from the appalling problems facing the US financial system and authorities, which must eventually have dire consequences for the dollar. Well, all the news is out now regarding the European Constitutional fiasco, from a trading point of view there is believed to be no more mileage left in it. That means that the gloating is going to have to stop soon as attention will be forced to return to the grim realities on the other side of the "pond".

Having had the "throwover" breakout detailed as a possibility in the last Gold Market update, the dollar is now extremely overbought and acutely vulnerable. A point we should note however, before going any further, is that the sharp advance in the dollar index this week is nowhere near as impressive as it looks on the index chart. This is because the move was almost entirely due to Euro weakness, rather than dollar strength - the Euro has a heavy approx. 40% weighting in this index.

A 2-year US dollar index chart is optimal for assessing the immediate outlook for the dollar. Looking now at this chart we can immediately see how the throwover breakout out of the channel shown has taken the dollar to an overbought extreme, shown by the RSI and MACD indicators at the top and bottom of the chart. The advance has taken the dollar up into an area of heavy resistance in the area of the trading range that developed last year. In addition, the dollar is very bearishly aligned in relation to its moving averages - it is way ahead of its 50-day moving average, and its 200-day moving average, which is still falling. All of this is a recipe for a reversal of trend.

The 6-month chart shows recent action in more detail. The stochastics shown at the top and bottom of this chart are very close to being maxed out, and thus provide additional evidence that a trend reversal is at hand.

All of this is of course great news for Precious Metals and Precious Metal stocks; gold put in a very strong performance yesterday, signalling an imminent trend reversal in the dollar, gold stocks succumbed to a wave of selling following the sharp advance of recent days, but the outlook remains very favourable.

Conclusion:- the dollar is acutely vulnerable here to a sudden and possibly severe reversal. Even if it fluctuates around the current level for a while, the heavy resistance in this area is expected to finish it off and send it into retreat. Gold's action yesterday signalled a new uptrend.