Thursday wrapped up another day of strange intra-day movement in regard to historical commodity/currency links; the Usd gained in the face of higher oil and gold prices, and was not at all impacted by the move in global equity markets to reach up to test near-term resistance areas. The fact that the dollar index was bought in U.S. trade may be attributable as much to the fact that overseas regions are fighting the Fed’s mandate to devalue the greenback at the expense of an increase in the value of the major pairs than anything else. Something has to give, and right now it looks as though the overseas markets are determined not to let the greenback fall from the current dollar index levels. This sets up a great technical and fundamental period of trade to come, and really highlights how important the Usd is to the flow and value of global trade.

There would be little doubt in most traders’ minds that the dollar based U.S. economy has major issues to deal with, but conversely at this point in time there are few regions that are not suffering the same fate. This begs the question as to what is going to get bought if the dollars already held are going to get sold. The U.S. has issues right now, but as the economy that has the currency that backs the majority of global reserves and the currency that nearly all global commodities are priced in, the U.S. is finding buyers of the dollar out of necessity.

Most major pair economies rely on a global export market to sustain their balance sheets and current account figures, and therefore most would prefer to deal with the current period of global contraction in a way that impedes the appreciation of their base currency; exporters in general prefer a lower value currency. As such the massive impact of the FOMC’s jawboning last week is still being felt. In the re-alignment, and fighting of, Usd de-valuation that came over two four hour session on Wednesday and Thursday of last week (something that otherwise would have taken four weeks to achieve), the markets have shown an unwillingness to accept the weak-dollar policy that has tried to be put in place.

The re-balancing of the sneaky Fed move from last week may take a little while to accept, and has certainly proven that however dire the U.S. based headlines are the market is still unable to shake the dollars from the grasp of those holding onto them right now. If dollars are sold, what alternative is attractive enough to get bought? The volume in the equity, oil, and gold markets is light, and certainly not correlating to those markets as easily holding the current levels than if market participation had backed the moves higher.

With the first quarter of 2009 drawing to a close, and the time having come to reveal the outlook for the next nine months, it may be that the upcoming earnings season will be able to force a move away from dollars and into other asset classes. Maybe, just maybe, the tide of dollar selling may hit, but it certainly at this point in time does not look as though it will be an equivalent tidal wave of the size and magnitude of ‘FOMC Wednesday’.