As Fitch cut the credit rating of Greece early this morning, the dollar caught a solid bid. The dollar is shown to be essentially a measure of the safety of foreign countries. Let me explain. Just like the Dubai default problem about two weeks ago, the dollar surged higher on the Greece debt ratings cut. The reason this happens is due to safety and security of money. The reason why the dollar has been pounded for so long is not only because the Federal Reserve is printing trillions of dollars and the government is spending trillions of dollars but also because foreign countries are becoming so much more attractive as investment vehicles. The worlds money, noting the continued risk of investing in the US especially with interest rates at essentially zero, have taken their money and moved it to foreign countries where the risk is the same or less, but they get much more in return. This is exactly why when problems happen overseas, the dollar becomes the safe haven and it soars. The dollar is the trusty asset that is safe. Whether the issue is Dubai or Greece, all of a sudden foreign markets show they have a ton of risk to the worlds investment dollars. When these problems arise, investors panic and run back to the safety of the US dollar. This drives the US dollar higher and pushes the market lower. Hope this helps many of you understand.
Below is a chart of the intra day SPY and the key/master levels to watch. Again, they continue to work with the utmost accuracy.
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