Emerging Money's  Instablog

With Korean war threats and European Union sovereign failures still very much on the front burner of global news flow, the dollar index is now almost 6% off its lows.

Early Friday, the DXY index was up another 93 basis points at 80.40, up 5.91% from the 75.91 level it touched on November 4 -- just three short weeks ago.

Since then, the Irish bailout and rumors of a similar arrangement looming on the horizon for Portugal or even Spain have pushed the euro back onto the defensive, while renewed artillery shelling from North Korea has unnerved traders in the Pacific Rim.

From here, the 200-day resistance line is in sight. Just a 1.7% push up from here, perhaps on a formal declaration of war between the Koreas over the weekend, would take the DXY index up beyond 81.77 trend line, converting current resistance into support and establishing a new upward trend for the dollar.

This, in turn, would push commodity prices in particular lower in a natural reverse move. (As commodities are traded in dollar terms worldwide, a stronger dollar translates into weaker effective prices on everything from grain to gold.)

Make no mistake: The dollar is not rallying here on strength in the labor market or a more robust U.S. retail environment. This is purely rooted in geopolitical factors.

Still, meanwhile, we seem tilting toward the "risk off" side of the world in the immediate term. Less UDN (quote), more UUP (quote).