Greenback Mountain

You don't want to hurt me
But see how deep the bullet lies
Unaware, I'm tearing you asunder
Ooh, there is thunder in our hearts
--Kate Bush

While few can be more bearish than me about the US Dollar in the long term, I picked up some UUP calls last summer because of the extreme technical and sentiment picture in the near term.

The dollar began rallying as markets tanked in August as dollar carry traders became risk averse and began unwinding leveraged trades funded w/ borrowed dollars.

As problem continue in Europe, folks have been selling Euros which has added more strength to the dollar.

UUP is currently 'doing work' right aroud the 22.25 resistance level. Should it break thru decisively, the technicals suggest 23.25ish as the next challenge.

Observe that back in late 2008 the dollar really moved when deleveraging kicked in. Another move like that can't be dismissed out of hand. The global macro picture continues to darken. And technical oscillators do not suggest a seriously overbought situation--i.e., they have yet to 'pretzel' on the upper end of the scales.

So, although I think the dollar could very well turn to dust over time, right now traders may view it as the best house in a bad neighborhood.

position in UUP