Dollar/Euro 1.14....Chart of the Day

Old Man Dollar is preening like the prettiest currency in the pageant, pretending to be something he's not, namely a strong currency. But does this dollar rally have legs? The chart below suggests no...but if the dollar breaks out of that downward channel...look for it to settle again at about 1.14...the level from which it began its last large down move. A lot of traders have spent the last month covering their short dollar positions, fueling the rally. I don't think, personally, that the dollar was oversold. Considering the twin U.S. deficits (both nearly half a TRILLION dollars) and the sketchy employment dynamics in America, it's hard to see how the dollar is any sounder now than it was in September. But the traders are covering, giving the dollar a flush of spring health...and happily coinciding with a string of positive reports about the American economy (March employment, retail sales.)