Euro struggles with the $1.34 level

The euro did manage to pop up above the $1.32 resistance level, which enabled it to push above $1.33, but the technical resistance at the $1.34 proved to be too much for even a "plunging" dollar. Part of the impetus for this "spurt" is the ongoing "crisis of confidence" over subprime mortgages and alleged potential contagion spread to the rest of the U.S. economy, and a misguided belief that the Fed is likely to cut interest rates "sooner rather than later." These fears are way overblown and eventually will evaporate, but timing that shift is a fool's errand.

I wouldn't be surprise if speculators managed to push the euro up into the $1.34 to $1.35 range in the next few weeks whenever there is any bad news to focus on, but it is just as likely that they will trade it back down under $1.30 as soon as people grasp the truth that the Fed is unlikely to cut rates over the next six months.

In short, the dollar is not "plunging."

-- Jack Krupansky