Dollar backtesting neckline

The U.S. dollar index was rebuffed at 76.82 by its falling 50-day MA on Thursday, then closed just above support provided by the neckline of the inverse head and shoulders on Friday.

If the dollar bounces here, there's a good chance it will plow through the 50-day MA to at least the next resistance at 77.66. Should the index fall through the neckline, however, that would negate the inverse head and shoulders, and a resumption of the dollar's decline would be likely.

On the weekly chart, RSI has climbed above 30, and the MACD histogram is threatening to cross above zero, indicating more strength to come in the dollar.

Silver found support again near its rising 50-day MA on Thursday but was repelled at the Fibonacci level of $14.70 on Friday. Although RSI is falling back toward 50, the MACD histogram has been rising gradually, so there is no clear indication of the direction of silver's next move.

Meanwhile gold has been hovering around $800 for several days, and RSI is threatening to fall through 50. If support around $800 fails to hold, gold could retest its 50-day MA, currently at $784.84, or the Fibonacci 38.2% retracement level at $773. Overhead resistance at the broken trendline lies just above $820.

Looking beyond the end of this year, JPMorgan expects the price of gold to average $815 in 2008, as precious metals outperform other commodities owing to weakness in the dollar. The bank said:

We still expect the $850 major highs to be broken and a run up to around $900 to be seen before we start to look for signs of a significant top, which is in-line with our USD view.