"When misguided public opinion honors what is despicable and despises what is honorable, punishes virtue and rewards vice, encourages what is harmful and discourages what is useful, applauds falsehood and smothers truth under indifference or insult, a nation turns its back on progress and can be restored only by the terrible lessons of catastrophe." … Frederic Bastiat


Evil talks about tolerance only when it’s weak. When it gains the upper hand, its vanity always requires the destruction of the good and the innocent, because the example of good and innocent lives is an ongoing witness against it. So it always has been. So it always will be. And America has no special immunity to becoming an enemy of its own founding beliefs about human freedom, human dignity, the limited power of the state, and the sovereignty of God. – Archbishop Chaput

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Thursday, February 10, 2011

USDX - Dollar Chart

The US Dollar was the beneficiary of two items in particular today. The first was the falling number of unemployment claims which has traders convinced that the US economy is continuing to mend and that the labor markets have finally bottomed out. They may well have but that is a long way from inferring that the jobs situation is going to reach anywhere near what could be considered healthy for some time. Even the Fed Chairman was not rosily optimistic about this when questioned yesterday.

The other item is continued fears related to the health of the Eurozone. Portugal in particular is on traders minds today as its bonds are reflecting a great deal of unease regarding its financial footing. This is leading to selling in the Euro which as you know constitutes over 50% of the basket of currencies that comprise the USDX.

For now, it appears as if the Dollar is attracting buying on dips into last weeks lower end of the trading range. It has some light technical resistance near 78.50 which it could well take out if we get some more bad news out of Europe or if we see additional confirmation of an improvement in the US labor markets.

For me to be convinced that this is anything other than another one of the Dollar's many bounces in a longer term downtrend, it would at a bare minimum have to convincingly clear the horizontal blue line shown on the chart and push past the 79 level.

Any extended bullish move in the US Dollar however will need to see it push past the twin tops shown on the chart near the 81.50 level.

Some of the selling in gold today was tied to the rather strong advance in the US Dollar so we will have to continue monitoring its action. It is noteworthy however that the strength in the greenback did not affect the broader commodity markets as we are accustomed to seeing, at least earlier in the session when the CCI went on to make another record high. As the afternoon wore on however, it did appear that some dollar related action began pulling several of the commodity markets down off of their best levels of the day.

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1 comment:

  1. AnonymousFebruary 11, 2011 at 5:36 AM

    The composition of the USDX is (wikipedia)
    Euro (EUR), 57.6% weight
    Pound sterling (GBP), 11.9% weight
    Canadian dollar (CAD), 9.1% weight
    Swedish krona (SEK), 4.2% weight and
    Swiss franc (CHF) 3.6% weight.
    Japanese Yen (JPY) 13.6% weight.
    The EUR, GBP and JPY are as much threatened by QE as is the US dollar (the respective central banks are just much less overt about it than the US FED) and the remaining 3 possibly harder currencies have only combined weight of 16.9%. I would therefore question the utility of the USDX as a measure of whether the USD is in a long term downtrend in terms of "value".

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