Which is the Carry Trade. Essentially this trade seemingly drives all other trades before it. Greece has potentially driven again, a run to safety in the US dollar, pressuring the sale of risk assets [higher yield] everywhere.

Add to the Greece type of event, we also have political risk, Bernanke not being reappointed, Federal Reserve raising rates, Fiscal tightening, etc. Currently, for whatever reason, the dollar is rallying, possibly simply short covering started the rally and coincidental events simply magnified the response. Either way, the correlations are again high.

The warning on a technical basis for the dollar was apparent through all of November, if you were paying attention. Some were, some weren’t. The current analysis suggests that the dollar is again, on a technical basis, ready to fall. It has gone far higher than one would expect, but that is the nature of markets. On UUP, $23.80, looks to be the level at which, based on current trends, could be the failure point. Thus stockmarkets and commodities, may well still have some downside left.

With Bernanke remaining at the Fed, and Obama in Washington, both from a monetary and fiscal perspective, inflationary policies remain in place. Once Greece resolves, assuming Spain and/or Britain do not follow, we should see a resumption of the dollar carry trade.

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