DXY finally broke down a bit this morning, dropping through the purple TL from Jun 14.It’s not much, but it does open the door to the larger move we’ve been expecting for the past 2 months.

The counter-argument:  EURUSD is approaching our next upside target – a backtest of the channel from which it broke down in July.  If it reverses there, DXY would likely strengthen again — particularly if the yen continues to weaken.continued for members…

For now, it’s taking its time – content to remain “broken out” from the falling white channel.

The bigger picture for DXY…

Frankly, equities don’t need that much help — as shorts are being stopped out in a low-volume environment.  A classic melt-up.

But, the melt-up has potential trouble at these levels.  Note that ES has reached the top of the white channel.  As we discussed yesterday, it has a decision to make regarding the white vs red channel.

Likewise, SPX has to choose between reversing at the white channel top or breaking out.  Like ES, there’s about 25 points downside potential if it decides to backtest the former highs.

One key will be VIX, which is threatening to break down below the latest rising channel.

This is all against a backdrop of a yield curve which continues to flatten…

…and, oil and gas prices which have also reached an inflection point. Note that TNX continues bouncing off the triangle bottom, with a trend line at 28.9 and the triangle top around 29.8.And, as an aside, NKD has reached the same level which has posed overhead resistance problems since May 21.  A failure to pop through could mean a big tumble to backtest the falling white channel all over again.  Not saying this is likely to happen, but it’s worth a look for nimble traders.As promised yesterday, I’ll be logging off and trying to finish my inflation study.  I hope to have it posted by late this afternoon.  GLTA.