The bear market in equities is still dominating forex trade, and is still allowing very little price action to follow through and hold for more than a session. Right now the market looks to be forced into dollar buying to hedge falling equities, and however tedious it feels each day that move is getting all of the attention. The market signaled in trade on Wednesday and Thursday that it is willing to sell the dollar on days that equities find buyers; Asian trade initially showed that on Thursday, and although still dominant in the mid to long-term the greenback now has a near-term dollar index outlook that will question the resolve of those long the Usd if global equities can string together two days of gains.

It seems unlikely that equities will do anything but continue the selling until the Financial sector, the XLF, can generate buying interest, and with shares of Citi touching under $1 in trade on Thursday that may be a hard thing to achieve. As such forex traders should look to the momentum coming from each of the regional market's equity futures opening, 2am, 7am, 7pm EST, and follow the momentum in each session before re-setting the thought process on where things are likely to go. Time has shown that very little has too much chance of holding for too long at the moment.

The 4 hour charts are still controlled by the Usd, there is no doubting that, but there is now doubt as to how long the dollar can get bought outside of the safety hedge against falling equity values. A continuation of equity selling really is not generating the kind of dollar buying seen over the last year of trade since Bear Stearns collapsed. We are looking for some yen cross pair trades forming over the coming weeks, and are very interested in seeing the reaction to the Bank of England and ECB rate decisions in Asian and the European trade on Friday.

The halcyon days of dollar buying may now be thoroughly tested in the near-term, especially as the cost of underwriting the 'safest' of bond debt, U.S. Treasuries, is increasing by the day. Credit Default Swap (CDS) premiums are rocketing higher at the moment, indicating that the cost to insure against Treasury default really has to be considered, and that may send a chill down the spine of those looking to be long-dollars for safety over the long haul; insurance costs just went up, and this time it has nothing to do with AIG.

It seems strange that there can be a bullish fundamental undertone possibly bubbling underneath the majors when the technical indicators are looking so washed out, but the dollar index has held 88.00 for longer than it would normally hold a price point; something has to give, and it may be the Usd/S&P link.