The U.S. Dollar Continues to Be the Safe Haven Currency.

Did the Euro “jump the shark” when Giselle wanted to be paid in Euros?  Whether that story was fact or rumor, it still represented the widely held belief that the U.S. Dollar’s good days were behind it.  And it wasn’t just a Victoria’s Secret model who punctuated this belief.  Small retail stores across the U.S. were accepting euros and dollars for payment.  The psychology was reaching a frenzy.

And now the snap back.

The EUR/USD’s slide is representative of the reversal of fortune for the U.S. Dollar.  Lower crude oil prices are helping certainly, but the rate cuts, discounting of future rates cuts, and credit crisis seem to be doing little to sway dollar buying.

The world is flush with U.S. Dollars as the Fed continues to print money.  Infaltionary, probably, but the Continuous Commodity future contract seems to be shrugging this off.

The fear of hyperinflation while justified is hardly confirmed by price…yet.

The bottom line is that the U.S. Dollar continues to be the “flight to safety” play - even more so that the gold market.

While the longer term fundamentals seem to be pointing to a weaker dollar some time in the future, it is precisely this price action “unconfirmed” opinion that has been obliterating EUR/USD buyers who seem intent in stepping in front the downtrend.