Dollar on path for a crisis
It can also fall when the U.S. says, and when it doesn't say, it has a strong dollar policy.
The dollar is moving toward a crossroads. The U.S. Dollar Index, which tracks the buck against a handful of the world's major currencies, has been consolidating along an uptrend line that began in December 2004, but also along a downtrend that started in November 2005.
Given that the trendlines are on path to intersect, the dollar will be breaking out soon. Technically speaking, it looks very likely that the direction will be to the downside.
With China and other countries freely talking of plans to diversify their foreign exchange reserves, which have been predominantly comprised of U.S. dollars, the FX hordes now have a fundamental excuse to push for a breakdown.
That would certainly run counter to the U.S.'s stated "strong dollar" policy at a time when a weak currency is certainly not necessary. If new Treasury Secretary Henry Paulson, Jr. doesn't want to deal with another currency crisis, like his ex-Goldman Sachs predecessor did more than a decade ago, he should realize that it takes more than a few unspoken words to turn a $3 trillion-a-day foreign exchange market.
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