How Low Will It Go?
This morning, the U.S. Dollar Index is declining again this morning. The U.S. Dollar Index has now declined lower by more than 17.0 percent since June 7, 2010. Yesterday, the Federal Reserve said that they do not have any control over the U.S. Dollar. Chairman Bernanke made a comment that suggested that the U.S. Treasury has control over the U.S. Dollar. We really have no choice but to chuckle at this statement by the Federal Reserve boss, is it not the Federal Reserve who controls the money supply? Oh well, it appears that Ben Bernanke is taking a page out of Alan Greenspan's book, he is living in his own delusional world. Does anyone realize that when Alan Greenspan tried this same weak dollar policy in 2002 that he created the greatest bubble and stock market collapse since the Great Depression. We can only wonder what the next market bubble will be and when it will burst.
The SPDR S&P 500 Trust(NYSE:SPY), and the SPDR Dow Jones Industrial Average(NYSE:DIA) are inching higher again. Whenever the U.S. Dollar Index declines the major stock market indexes will inflate higher. Traders can continue to buy the dips intra-day as long as the dollar continues to plummet. The U.S. Dollar is now very oversold, however, there are no signs of a bounce for the dollar as it continues to fade into the abyss. The next important support level for the U.S. Dollar Index will be the March 2008 low. The March 2008 low was $70.69, it was also the all time low for the U.S. Dollar Index.
When the U.S. Dollar declines everything that people need for survival becomes more expensive. Food, energy, and most every commodity besides natural gas has soared higher over the past two years. Gasoline prices have soared higher by 70.0 percent since the Federal Reserve announced its QE-2 program in late August 2010. Just look at a chart of the United States Gasoline Fund(NYSE:UGA), the UGA was trading around $30.00 a share in August 2010. Today, the UGA made a new 52 week high around $55.50 a share. Yesterday, Ben Bernanke said that high energy prices were caused by demand, however, the chart suggests that it is caused by the Fed's weak dollar policy and inflation inducing methods. You be the judge. The chart below says it all.