Dollar bashing has driven the U.S. dollar to an 11 month low against the Euro and 1 year low against the Australian dollar. If you have caught my interviews on CNBC and Bloomberg, you would know that I have been bearish dollars and bullish Aussies and Euro for the past 2 months. Now that key levels have been broken, there is room for more gains for those currencies which means losses for the U.S. dollar.

Although the comments from the U.N. meeting triggered the sell-off in the dollar, recent economic data indicates that the for the time being, the recovery trade is still on. We have seen upside surprises in data from the U.S., Eurozone and the U.K.

It is very important for the EUR/USD to hold above 1.45 and as long as it does, resistance doesn't come in until 1.4720. For the AUD/USD, my updated target is 89 cents and I am sticking to it. I think USD/JPY could also break support, but I explored that in more detail in my special report "Will USD/JPY Also Test Its 2009 Lows?"

The sell-off in the dollar is of course contingent upon continued strength in equities. If stocks start to lose momentum, the rally in the EUR/USD and the AUD/USD will fade as well. That is why the charts that matter has to include the S&P 500. The key levels to watch are 1039.47, the 2009 high and 1016.50, which is Friday's high. If stocks rise above the yearly high, we could see an extension to 1100. If the index falls below 1016.50, we could see a move below 1000.

All Eyes on Gold

Gold prices are also gaining traction which is not surprising considering the seasonality aspect of gold in the month of September. In 8 out of the last 10 years, gold prices ended the month higher in Sept. So far it looks like this patter is repeating.