The U.S. Dollar

[setravis]

Wednesday, June 8, 2011...

•   The dollar index this morning is higher with the dollar/yen -0.24 yen and the euro/dollar -0.63 cents. The dollar index yesterday fell to a 1-month low and closed lower after the euro rallied to 1-month high against the dollar on stronger-than-expected Euro-Zone economic data along with ECB President Trichet's approval of Greek bond rollovers: Dollar Index -0.424, USDJPY -0.009, EURUSD +0.01152.

                Bearish factors included (1) reduced European debt concerns which undercut the safe-haven demand for the dollar after ECB President Trichet said a rollover of Greek debt as an alternative means of easing Greece's funding squeeze "is not a default, and is something the ECB would consider appropriate," and (2) stronger-than-expected European economic data on Apr Euro-Zone retail sales and Apr German factory orders, which signals economic strength and is euro supportive.

                Bullish factors included (1) weakness in the yen after Japanese Finance Minister Noda said "I w ill closely monitor developments in the markets," which indicates he may favor additional currency intervention if the yen strengthens further, and (2) dollar supportive comments from Dallas Fed President Fisher who said that despite signs the economy may be slowing, the so-called "doves" of the FOMC will not be pushing for another round of monetary stimulus for the US economy.

[setravis]

Dollar Index

The Dollar Index is headed for a test of the rising trendline after a false break above 84.00. Respect of the trendline would indicate the primary up-trend is intact, while reversal below 80.50 would warn of a primary down-trend. Bearish divergence on 13-week Twiggs Momentum indicates trend weakness. Recovery above 84.50, however, would signal an advance to 90.00*.