US Dollar Attempting Weekly Breakout

The strength in the US Dollar has mainly been coming from investors fleeing Europe leading to an outflow from the Eurozone plus Japanese bond investment money that is in search of higher yields. Quite frankly, in the search for yield in a NEAR ZERO interest rate environment, global investors are throwing caution and any reservations that they may or may not have out of the proverbial window and rushing into the US equity markets in anticipation of further ONCE IN A LIFETIME TYPE GAINS.

In other words, the Central Banks have unleashed a speculative frenzy for stocks which is creating a massive equity markets bubble, especially here in the US. As money flows out of various portions of the globe looking for a home in US stock markets, that money must be EXCHANGED for US Dollar with which to buy US stocks. The result - the Dollar is surging higher while the Yen and Euro, along with the other majors, are dropping lower. In other words, foreign money flows are driving the US Dollar higher (this is in spite of the clearly and visibly dysfunctional US government and corruption currently enveloping it).

I expect this to continue until something rattles the cages of the equity bulls. What that might be or when it might occur is anyone's guess at this point. Manias of this nature can continue well past the point of sanity. When they end; they end in a blaze however.

While it continues on, the US Dollar keeps getting pushed past various chart resistance levels. I have noted this week's push into a band of resistance starting near the 84 level and extending up to the session high of today near 84.25. IF, and it is unclear yet, the Dollar closes the week ABOVE this level, it has one more obstacle to clear before it sets up technically for a run all the way back to the double top formation at 89. That last level of resistance is the 85 mark.

It is the confluence of the pitchfork and the 75% Fibonacci Retracement level from the doble top back in 2010 and the low in the summer of 2011 near 73. From a strict technical analysis perspective and based on Fibonacci retracement theory, a market that pushes through the 75% retracement level,can be expected to retrace the entirety of the preceding price move. Translation - back to 89 the Dollar goes.

I want to add here that this rally in the Dollar is that which has been undercutting the entirety of the commodity complex. Hedge fund algorithms are mechanically selling across the sector. Gold is being included in that. While physical market demand remains firm, sentiment towards it in the West remains miserable. It is all about YIELD, YIELD, and YIELD. Gold throws off no yield and stocks do. That is what this is all about right now.