Since the late spring of last year, the US Dollar has been the recipient of a fair amount of "safe haven" flows, mainly in response to the woes afflicting Europe and by consequence, the Euro. We have said repeatedly that the US Dollar rally was not based on any desire to own the Dollar out of bullish economic fundamentals but rather out of fears concerning the viability of the Euro.
What this translates to is that any news or developments that seem to lessen the severity of the European sovereign debt situation, whether through concerted Central Bank action or from any other front, will send money flowing right back out of the Dollar and back into the Euro. Note that the last two weeks, particularly this week after the FOMC just cut the legs out from under the Dollar for as far out as the eye can see ( 2 years), the Dollar has seen very heavy selling which has confirmed the level near 82 as significant chart resistance. The Dollar failed here last week and has not as of yet been able to regain its footing.
When you couple the FOMC statement this week with today's release of the abysmal 1.7% US GDP reading for 2011, is it any wonder that the Dollar is sinking like a lead brick.
If it fails to bounce here near 79, it looks like it has a clear shot back down towards 77.
"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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