SEATTLE (MarketWatch) — While markets have been oscillating lately as traders worry about catalysts such as the Chinese interbank lending market and the prospect of a tapering of bond-buying stimulus by the Federal Reserve, insiders have been reacting to every wiggle in the U.S. dollar. From emerging-market stocks to commodities, all are rising and falling based on how the greenback is trading relative to the euro and the yen.

Right now, the evidence suggests the dollar is poised for a new round of weakness as the euro and yen perk up. And that suggests that dollar-sensitive assets, such as foreign stocks, crude oil and precious metals, should all be headed higher.

Here’s why.

For one, the Fed is sounding an increasingly dovish tone and seems to be on track to use extended low short-term interest-rate guidance as a form of “verbal easing” to offset a likely taping of the $85-billion-a-month QE3 bond-purchase stimulus later this year. Officials are increasingly concerned about falling inflation and will keep pushing cheap money into the system until it returns to its 2% target.

Secondly, both the European and Japanese economies are showing clear signs of firming.

Improvement has been especially notable in Spain and Italy. Spanish manufacturing activity suggests the country has exited its recent recession. Italian consumer confidence beat expectations in July boosted by hopes the government will revive growth. Business confidence is also on the rise, as shown above. In Rome, the lower house of parliament approved a pack of stimulus measures, cutting regulatory red tape and boosting infrastructure spending.

In Japan, economic sentiment has surged. Deflation has given way to inflation and wage increases, unlocking savings and encouraging consumer spending. Even Japan’s beleaguered real estate market is showing signs of improvement, with housing starts running at their best level since 2008, while Tokyo condo sales are rising at the best rate since early 2011.

Third, the short-yen/short-gold trades have been quite popular since last September. With traders so extended on these trades, and with signs of a turnaround for both the yen and gold, short-covering could cause prices to move higher in a hurry while pressuring the dollar.

Consider that small speculator bets against gold in the futures market has grown to its highest level since at least the early 1990s after reaching extremes not seen since late 2008 — a point that marked the end of a year-long decline in the yellow metal. Also, consider that large commercial traders have built a long-yen position on a scale not seen since 2007 over the last few months.

Fourth, the looming fiscal fight in Washington, due to start next month, will once again rattle confidence in America’s political system. Both the 2014 budget and the need to raise the debt ceiling will be debated. Both Republicans and Democrats are hardening their positions. Expect some brinkmanship before a compromise if eventually found.

And finally, the prospect of higher inflation could be a drag on the dollar as well. Inflation has been tame over the last year, as oil prices cooled from a high reached in early 2012. Analysts at Bank of America Merrill Lynch see global pressures resurfacing, from higher pork prices in China to a fuel price hike in Indonesia and active efforts by Japan’s leadership to boost prices. As commodity prices rise, it will add downward impetus to the dollar.

Chart courtesy of StockCharts.com

The clear beneficiary of the dollar falling out of its multi-year consolidation pattern will be gold and silver, both of which have been hammered since last fall on a combination of lower inflation and a stronger dollar. Merely a return to its 50-day moving average would be worth a near 20% gain for gold.

Gold- and silver-mining stocks would also perform well. My favorites, on a drop in the dollar, would be fast moving names Golden Star Resources (GSS) and Coeur D Alene Mines (CDE).

Disclosure: Anthony has recommended both GSS and CDE to his clients.