NYBOT Dollar Index

Bulls dominated yesterday, although it's curious that they couldn't muster just a little more thrust to take out the 77.99 external peak I'd flagged as a bullish trigger point. This feat seems likely to be achieved today, which would square with my current, dour forecast for gold.  The nearest important Hidden Pivot resistance above lies at 78.25, and it can serve as our minimum upside target for the near term.  If DXY exceeds this number on a closing basis, though, it would be hinting of more upside to at least 79.18.

The correction from last Tuesday's peak should turn from 77.44  or higher if bulls are to resume their dominance. That would become instantly true if DXY were to pop above 77.99 today.  Traders looking for a place to bottom-fish can use a 77.02 target -- my worst-case low for the near term, but also the spot with the best odds for speculative buying. _______ UPDATE:  DXY has surged today, but the rally peak has thus far failed to take out the look-to-the-left peak at 77.99 mentioned above.  Bulls are obviously in charge, if noticeably lacking in guts. 

A Hidden Pivot rally target at 78.35 should show some stopping power, but if DXY gets past it, look for the buying spree to continue to at least 78.72.  A move to the latter number would imply that February Gold is likely to find only fleeting support at 1090.

The move from the December 1 low at 74.27 is still  uncorrected, demonstrating once again that there is nothing so bullish, technically speaking, as a rally that is insanely overbought. This one most surely is, and it  could become even moreso this week by surpassing two or three more external peaks.  From a Hidden Pivot perspective, the nearest target we can use for a benchmark lies at 79.03, a Hidden Pivot.  Its midpoint sibling is 78.36, exactly 0.22 points above Friday's high.  If the midpoint is easily breached, consider the higher target a done deal.

Hidden Pivot obstacles loom at 77.42 and 77.53, and we should be able to tell how much more buying power is left to drive this rally once we've seen DXY interact with them.  The latter number is doubly important, since it lies just above a key peak at 77.47 recorded on October 2.  Looking at a much bigger picture on the weekly chart, the trend could continue to as high as 83.33 without affecting the likelihood that the uptrend since March 2008 has been just a garden-variety bear rally. _______ UPDATE (12:23 a.m.):  DXY has blown the roof off resistance in night trading, taking out all three resistance points  noted above.  Since there has yet to be a pullback, the full power of the impulse leg begun from 74.27  on December 1 has yet to be revealed.

Friday's rally showed a faint yellow streak when it failed to take on a key high at 76.82 recorded on November 3.  That wouldn't be much of a feat if it happens today, as I expect it will, but the fact that the rally didn't achieve the benchmark on the first attempt argues against the likelihood that we are witnessing the beginning of a bull market in the dollar.

It is the boldness with which DXY traverses the space shown in the accompanying chart by which we should judge the mettle of this rally, assuming the dollar achieves the modest heights indicated.  Penetration of both peaks with no intervening B-C pause would be strong evidence that the bull is about to rampage and that the current, somewhat subdued short-squeeze has bigger things in mind. Thus far, though, the rally, such as it is, suggests that carry-trading shorts are not exactly panicked, at least not yet.

Thursday night's pullback looked corrective, since it follows the breach of a look-to-the-left peak created Tuesday on the way down. Please note that the dollar would create a robust new impulse leg if it can get past a second look-to-the-lefter at 75.02. If it does, it would turn the visually obvious peak at 75.09 made the same day into a dead duck.

A longstanding target at 72.93 still looks compelling, although the dollar seems too well controlled at the moment to take the implied dive straightaway.  If there's any official support for the buck at this point, it would become manifest with a pop to  76.00. Failing that, however, we can only infer that the dollar has no sovereign friends willing to put their money where their mouths are.