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U.S. Dollar Spike Deflates Markets

May 05, 2011 10:11 AM ET
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Seeking Alpha Analyst Since 2009

InTheMoneyStocks.Com is a research and consulting company focused on mathematical proprietary techniques along with a key understanding of price, pattern and time. Through understanding geometry and other technical analysis methods, InTheMoneyStocks.Com prides itself on avoiding Wall Street hype while calling major and minor moves in the DOW, NASDAQ and S&P, commodities, currencies and stocks. Mission Statement: Our goal is to provide accurate and precise market guidance without the Wall Street hype.

 This morning the European Central Bank (ECB) kept their benchmark interest rate unchanged at 1.25 percent. ECB President, Jean-Claude Trichet, made a statement that he never pre-committed on rates. This statement caused the U.S. Dollar Index to rally higher. Then once the weekly initial claims report was released at 8:30 am EST, the U.S. Dollar Index really surged sharply higher. This spike higher caused the Currencyshares Euro Trust (NYSE:FXE) to really drop sharply lower ahead of the opening bell at the New York Stock Exchange (NYSE). The FXE is trading lower by $1.20 to $146.53 a share. When the U.S. Dollar Index is higher the Euro will be lower.

The major stock market indexes also dropped sharply lower as the U.S. Dollar spiked higher. Traders can see declines in many of the leading commodity stocks such as Cliffs Natural Resources Inc.(NYSE:CLF), Freeport McMoRan Copper & Gold Inc.(NYSE:FCX), and United States Steel Corp.(NYSE:X). Gold and silver are also under heavy selling pressure with the surge higher in the U.S. Dollar Index. Traders must keep one eye on the U.S. Dollar Index at all times. Often the U.S. Dollar Index will decline from its morning highs once the opening bell rings at the NYSE. Should the U.S. Dollar Index decline or pullback the major stock indexes will inflate and trade higher. Remember, when the dollar is up the market is down and vice versa.

Nicholas Santiago

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