Wednesday, May 12, 2010

From Olson Global Markets USD strengthening see previous articles discussing why this would occur.

Thanks Ted Aivars

The U.S. Dollar Index (DXY) Quickly Approaches Key Resistance


Financial unease triggered by soaring yields for Greek, Portuguese and
Spanish debt along with worries over possible sovereign debt
“contagion” send the Euro sharply lower last week triggering a race to
buy gold and the U.S. dollar. Civil unrest in Greece combined with a
growing perception that the ECU is being run “by committee” added to
an accelerated shift toward the greenback.

While the recent panic has not yet been quelled, measures announced on
Friday suggesting that Euro land’s leaders plan to create a financial
facility to defend the euro and create a pool of capital aimed at
bringing down interest rates in its weaker sovereign economies may
help to reduce fears heading into this week’s trading sessions.

Technically, the U.S. Dollar Index (DXY) has soared and now appears to
be aimed at a test of key trend line resistance at 86.50 while in an
overbought condition on weekly charts. Due to the DXY’s recent inverse
relationship to U.S. equity markets, it appears that while the dollar
likely has a bit more upside ahead of it (before hitting resistance at
86.50), U.S. equity markets may experience further weakness near-term.

If resistance at 86.50 halts the upward path of the dollar index
however, equity prices might once again find their footing and resume
their move toward higher levels.

By Jim Donnelly, Olson Global Markets

2 comments:

  1. Aivars: I wanted to pay you a complement! You’re calling of this market correction when we met for lunch in Naples last month was impeccable! The market needed an excuse like Greece’s massive government debt to blame for a drop in equity values. I suspect it will go on for at least a few more weeks. Maybe a little more ugliness over Goldman will bring the financial sector down a little.

    Cheers,
    Greg Dimmer

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