Last week currency traders celebrated what was advertised as a resolution to the European default crisis by selling the dollar and getting long the Euro. Alas as the details, or lack of same, on the Greek "selective default" emerge, it seems the dollar is back to being the worlds' tallest midget, regaining some of its appeal relative to the Euro. All of which is a long way of saying the U.S. dollar's recent decline, and its bullish implications for stocks, ended before it began.
The bottom-line is the Euro vs. Dollar ratio remains between 1.45 and 1.40. It also remains important as demonstrated yet again thus far on Thursday with both U.S. stocks and the Euro moving higher. But Breakout isn't here to tell you what the weather is, we're hear to tell you what it's going to be. To that end we welcomed Jon Najarian, co-founder of OptionMonster.com to help tell us where we're going and how to profit from it.
Najarian says the weakness of the Euro comes not just from the flimsy nature of last week's deal but also the apparent resolve of the two biggest dogs of the EU pack, France and Germany, to stick with what's not working. "There's the political will in Europe to hold this union together," says Jon with a dark chuckle.
Nicolas Sarkozy and Angela Merkel's determination to force French and German citizens to support the PIIGS to the detriment of their own countries may be equal parts disturbing and weird, but it does have economic implications in the states. Specifically it suggests the Euro has regained it's status as the world's worst Super Power Currency, potentially driving the dollar higher. A move higher by the dollar would be unambiguously negative for commodity prices, particularly gold and silver.Read More »from Gold and Silver Looking Heavy for a Trade: Najarian