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The primary pressure on the dollar is the expectation of what Fed Chairman Ben Bernanke will say before Congress tomorrow. He is thought to be ready to underline, (perhaps not in bright red, but underline nevertheless), the Fed's position that this month seems to be pointing toward not tapering QE3 come the September FOMC meeting.

Phil Streible, a senior commodity broker at R.J. O'Brien & Associates in Chicago, said "People expect Bernanke to repeat what he said last week. The weakness in the dollar is keeping gold well supported today."

Boiled down to one sentence, Bernanke said on July 10th in a speech in Cambridge, Massachusetts: "Highly accommodative monetary policy for the foreseeable future is what's needed in the U.S. economy," 

Some Fed policy makers, including St. Louis Fed President James Bullard, have expressed concern inflation is too low, raising the risk of an outright decline in prices that would sap the recovery.  

However, today the U.S government reported that the Consumer Price Index rose 0.5% in June, it's largest rise in 4 months. Two-thirds of that rise was due to an increase in fuel costs, which rose about 3.5%.  Gasoline rose more than 6%.

"Core" inflation rose only 0.2% for June. In fact, core inflation rose only 1.6% for the 12 months ending June 2013. 

The rise in the overall CPI may give heart to hawkish FOMC voting members, but they need to stop, reconnoiter, and think about what is driving fuel prices up, and try to make an educated guess as to how long the rise can last before stopping or even falling back. The answers are, in no special order: Egypt and Syria; a hotter-than-normal summer that is increasing fuel demand for making electricity; more vacation travel early in the season; and low inventories.  

Have no fear. Egypt and Syria won't disrupt oil flow through the Suez. Summer will actually end sometime in late August in much of North America. People go back to work and school in seven to 8 weeks and consumers do react to higher gas prices quite vigorously, which in turn leads to inventories rising. 

There is, though, another inflationary factor appearing. It is still a long way from fully recovered, but the housing industry is rebounding mightily and confidence among the nation's homebuilders is rising rapidly as they see more buyers who are highly-motivated. There is still plenty of inventory to clear out from the housing bust, however. 

We're not quite sure when the fuss over to taper or not to taper will subside. We know it has to begin within the next 4 to 6 months. Yet, interest rates will not be rising for a long time. Perhaps for years. 

Ask the skies for cooler weather. Ask for inflation while you're at it. A cheapening dollar could be the bull's best ally and help create some long-term momentum.