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.