$USD – 11 May

The dollar is rallying on scarcity issues. When everyone decides that commodities are risky and the risk trade must be unwound, they need dollars to exit. Not because the dollar is shit hot and really cool to own, because it is liquid. The fundamentals have never been worse for the greenback. Remember what you are looking at when you look at the dollar index, it is a comparison of the dollar to a basket of other global currencies. It shows relative strength or weakness as compared to other floating debt based currencies, not to something fixed, no-debt based, and in limited supply. So do not expect a 1:1 inverse correlation between gold and the USD. Gold is rising in terms of all fiat debt based currencies, just rising at different rates in terms of each individual currency. The telltale is that gold is setting all time highs in terms of all currencies, only at different times.

Here’s the latest USD chart with support and various levels of resistance annotated. As can be seen, the chart is very bearish and has seen lower lows continually off of the high above 81 back in January. Current resistance is around 75.5. If that level is taken out then the chart loses its current down trend and becomes neutral. With the Eurozone sovereign debt war drums pounding once again, it appears a dollar rally may continue to the next higher resistance level at least, around 76.50.

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