When the Dollar broke the 78 cent mark on the DAILY chart I was beginning to wonder if this breach represented a significant technical event that might further extend this countertrend rally out for not just a couple of weeks but maybe as long as a couple of months. Lately I've been considering an extended Dollar rally scenario a distinct possibility especially when wise men like Eric King have also recently cautioned his listeners about COT gang shenanigans that might goose the Greenback a little higher, for a little longer than most of us Gold savvy folks expect.

After reading Howard Katz's latest piece on the Dollar this evening I'm relieved to say that I'm not so sure this rally has much more manoevering room to the upside. As you can see the following WEEKLY chart clearly shows the Dollar still has yet to clear an important technical hurdle - a horizontal resistance point that draws the line at the neckline of the last major countertrend rally which amounted to nothing more than a dead-cat bounce in the midst of a generation decline. Until that neckline hurdle is decisively broken with a rise to higher than 80 cents, it's safe to say this countertrend rally has little muscle left in its spindly legs. Probaly no more than a couple of weeks before it begins to probe for new lows on the USDX index.

Any halfwit Technical Analyst only needs to see the mushroom cloud rising over the remnant of a once powerful US economy, to draw a rational conclusion from this chart. Namely, the Dollar formed a bearish double-top last year, fell through key resistance and is now probing the same resistance before selling pressure returns the FRN back into the abyss. This is a classical and well-followed pattern that many well-heeled Hedgies are paying close attention to because their black-boxes are most likely predicting the same bad outcome for the Greenback. And all this meshes well with the pattern of previous Gold rallies where we took a breather before heading much higher in the coming months.

ESL

http://www.shtfplan.com/howard-katz/kiss_01252010