Hooboy

A Closer Look at the Dollar Rally

All you people making the case that this rally isn't real due to fundamental reasons are missing a few points.

1) One currency is always traded relative to another. So even if in absolute terms the eurozone fundamentals don't seem as bad as the US fundamentals (an arguable point), it's the direction of these fundamentals that matters. Eurozone has been turning a corner (for the worse). So while the US fundamentals are bad, they're likely not going to continue to deteriorate at such a rapid pace as was occurring when we saw the dollar decline. Eurozone fundamentals, on the other hand, will probably see an increase in the rate of deterioration.

2) You can say this analysis is just technical if you want, because the chart just shows one point in time, and therefore it's apparently lacking information. But, the run up to this breakout was very strong. Anyone who was involved with the USD the weeks leading up to it would (should) have noticed this.

3) You say it's purely technical, but what was the final catalyst? Trichet's speech. Not just the rate decisions (which were as expected), but the thoughts of the central bankers on their respective economies is what pushed USD over the tipping point into this breakout. I'm pretty sure Trichet didn't mention any price charts in his speech :)

Of course, if you want to continue to be USD bears, more power to you...I'll be taking the other side of that trade.