Dollar will move sideways as Federal Reserve is caught between lower growth and commodity hyperinflation
Nancy Oscar
Jun. 14, 2008

US Dollar rose to a one-month high this week as Treasury Secretary Henry Paulson declined to rule out intervention to support the dollar and U.S. retail sales increased in May twice as much as economists forecast.

According to some economists dollar rose the most against the euro since 2005 because Federal Reserve Chairman Ben S. Bernanke said economic risks have faded, raising speculation policy makers will increase borrowing costs this year to contain inflation.

However the negative correlation between dollar and the stock market in the last several weeks tells us something else is happening. Most likely Fed is wrong again. They will retract their confidence in the economy back again like never before throwing dollar to a new low.

Dollar is in a secular bear market and the cyclical bull has run its course. The Gold market is telling us that it is ready to move higher again.

The dollar increased 2.5 percent to $1.5380 per euro, from $1.5778 on June 6. It touched $1.5303, the strongest level since May 8. The U.S. currency rose 3 percent to 108.19 against the yen, from 104.93, and touched 108.38, the highest since Feb. 14. It was the biggest gain since December 2004.

It may be the ideal time to sell US dollar index futures. But do not expect dollar to fall below 70 in the Dollar Index.

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