Euro biggest drop in 8 years- Dollar benefits

Euro had the biggest fall in 8 years. This was after ECB President Jean-Claude Trichet said economic growth will be ``particularly weak'' through the third quarter. People don't like surprises and it was was reflected in the reaction to the news. The Euro/FXE broke the 200 EMA. And the Dollar broke above the 200 EMA. This was more pronounced in the prices of Oil which has been only going down. The Dollar also broke through a downtrend line that was in place.

The Dollar is also benefiting from a lot of heavy inflows. The easy trade of 2008 of being Long-Euro and Short-Dollar is unwinding furiously.
In recent past, we have seen many top investors like Marc Faber, Dennis Gartner shying away from commodities. Overall this will all help the US Stock market.

Oil/USO is a little bit away from the 200 EMA. You should expect a bounce from this moving average. At that time, we will be again seeing the Long-Euro/Short Dollar trade playing out.