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In March 2009 the Federal Reserve instigated economic action that impacted the future values of the dollar, by initiating a stock market rally that found legs because of the Fed becoming the lender of last resort. The lines of liquidity ran deep, and long, and managed, in principal, to stem the flow of institutional cash being hoarded, and instead reversed cash back into the open market. The net result was that equities moved higher, and the dollar moved lower.

Fast forward to July 2009 and we can see the same kind of Fed speak hitting the wires, but this time we have a less than energetic Fed Governor delivering a message that seems to be ready to reverse the back-stop, just as soon as the last party-goers have left the last of the Treasury Auctions, that drips out the last of the Stimulus Package based debt, that the U.S. taxpayer is now lumbered with.

The rhetoric can change slightly now, because the administration chose to hock the nation's future growth for an adrenalin packed infusion of Stimulus that was due to hit a main economic artery, and create a consumer buzz like no other. The issue is, realistically, the buzz was short lived, and the Stimulus junkies are now back, looking for more, after becoming hooked on the flow of cheap money, that went little further to than the vault of the commercial banking institutions that received it.

There really could be no better time to take stock of a situation that has created the largest of debt mountains the world has ever seen, and ask, seriously, did anybody give thought to how this is going to get repaid?. The jump-start has fizzled like a battery lead hooked up to the wrong terminal. The hurry-up and wait response to passing a bill that now the public are told will take forever to repay, and maybe longer to see the results of, can be seen in the deflation felt across the global market as the tale of economic woe unfolded.

The bottom line? The dollar will be more than ever before hooked to the shirt-tails of the S&P futures market in how it is able to trade. We can forget green shoots, analyst opinions, political satire in regard to the situation, and instead we can look to the global investment arena taking its cue from wherever the S$&P Futures market goes. The equity sentiment is going to reflect the ability for the dollar to rise or fall.

This is not a fair value market that is looking at forward debt-to-growth ratios, nor regional economic sustainability; this market will now go into bursts of regional equity trade, and the dollar will follow around, beholden to the overseas purchasers of U.S. debt. There looks to be little chance of seeing sustainable Usd appreciation, more likely is to see the reversal of dollar selling, in limited form, on the days that equity markets drop.

It is very clear that no other global currency is in much better condition right now, but this will not be a regional currency story; it will be a buy stocks, or buy bonds story, at least until the end of the year. If equities rally, and who really knows what will happen in that arena, the dollar will get sold. However, on days that equities get sold, the dollar selling will get reversed, but not to the same degree.

In four months time we will look back and wonder how the dollar got down so low without many really noticing, if that is, equities find buyers. If however, bonds are bought instead, we will see more of the same one-day-up, one-day-down periods that has been in place through June and July.

Fed speak has its place, and today it seems that the Fed clearly laid out what we can expect from forex markets going forward. To be fore-warned, is to be fore-armed, and we are ready for whatever comes our way. Buy the pull-backs, sell resistance, and look to leave a runner in place to catch the bigger breaks that may come.