Last week, the Dollar Index breached an important support, the 80-79.5 region (highlighted), negating one possible wave count for a stronger and higher USD.
The markets seem to suggest that Ben Bernanke was not just merely using empty rhetoric when he said deflation will not be allowed to occur. The reserve currency is getting debased. We already saw some intervention on the Yen from BOJ and we should expect more such actions from other monetary authorities around the world. One can also see Gold hitting new highs across almost all the currencies indicating potential or real drop in their values.
While in the past the US Fed has managed to prop the markets up by such debasement, my sense this time around is that it will work initially before stocks and the US Dollar sink in lock-step. As can be seen from the above charts, the Dollar Index gets support around 76.5- 74.2 and the all-time low of 71. I will be surprised if the world does not slip into a currency crisis below 71 Dollar Index. Until that happens, enjoy and embrace the ride in the stock markets around the world while being prepared for the future.