I have to admit that I have literally and figuratively “gone fishing” in terms of engaging these crazy markets this week…so much so that I have fled to Dallas for a mini-vacation to keep from getting involved in the market’s flurry…and fury.

I do have 52 week high/low alerts and many have gone off this week (EUR/USD, EUR/JPY. AUD/USD, Nasdaq Comp., NYSE Comp…) but it’s the U.S. Dollar that I am watching as it pierces the big psychological 80.00 decade level.

I will be watching the 80.00 level closely (on the daily chart) for a re-test.  Breaking up through 80.00 shows that the ceiling can be broken, but that is NOT the same thing as this ceiling becoming a floor.  Price action must establish that.

Realize that it is not inherent strength in the greenback…rather it is comparatively strong when looking at the Euro and that has the EUR/USD tanking (current support is at 3800) pushing the Dollar Index higher.  

October, November, and December Fed Funds futures have a 25 basis point cut fully discounted and a 50 basis point cut as a possibility.  This would be dollar bearish, but greenback bulls don’t care.

The 700b rescue plan is really going to be a 1.5t (trillion) dollar plan before we know…history tells us these initial estimates represent half of what is typically going to be spent.  The Fed will lower rates to 1.75 or 1.50%.  If crude oil bounces at the 90.51 low, head’s up!  But let’s not forget the other side of the dollar argument…Is the decoupling theory unraveling?  Is that the fuel for the USD rally?   Read this artcile from Reuters.

Are dollar buyers bullish because the are long…or long because they are bullish?  I am thinking that there are an incredible number of stops sitting between 80.00 and 80.80.  And we all know the market moves in the direction of the greatest number of stops…

I’d love to hear what you think…

 - Raghee