The Dollar is Flirting Dangerously with a Major Support Level

Risk trades are being put back on in today's session with a fury - markets which had been limit down this week and now limit up today. Corn and Cotton are two in particular which stand out. That's the thing about the hedge funds - they are either selling everything in sight or buying everything in sight. Hogs are pushing towards limit up also after being smashed limit down earlier this week. In short, the risk trades are being put back on with the same fury as they were being abandoned earlier this week.

Interestingly enough, the Dollar is getting slammed lower as all of the majors, with the exception of the Australian Dollar are trading higher, in some cases, sharply higher, against it. This fits with the pattern that I have detailed previously about the very weak response of the US Dollar to the safe haven play or the move towards risk aversion. It simply did not have the kind of upside strength that one would have expected during a time of crisis. That lack of strong move higher underscored what I believe is the inherent weakness in the greenback. Simply put, the Dollar looks sick.

The Yen makes up nearly 14% of the basket of currencies that comprise the USDX and its massive rally explains some of the weakness in the Dollar but the fact is the Dollar has not performed in the manner which many of us are accustomed during times of uncertainty or fear among global investors.

If the Yen is knocked down sharply by the BOJ, that will provide some strength to the Dollar index but that had better happen fairly soon or the Dollar is not going to hold this major support level near 76 that it is perched precariously above. All eyes still continue to wait for the BOJ.