NEW YORK (TheStreet) -- Ben Bernanke spoke last week in front of Congress and made the case that the Federal Reserve would remain flexible and continue to act in reaction to economic currents.
This leaves the dollar in a vulnerable position. He did not explicitly say which way the Fed was biased, which is currently reflected in the dollar's price action. The chart below is of PowerShares DB US Dollar Index Bullish ( UUP) over CurrencyShares Swiss Franc Trust ( FXF). This pair measures the true strength of the U.S. dollar, as it is compared to the franc, a traditional safe haven currency. The U.S. currency resides at levels around the midpoint for the year. It has found support over the past few weeks, but future movement will be heavily reliant on economic releases, as those are also the focus of the Fed. Although it looks as if a double top has formed in the price action, it would be premature to assume the dollar goes lower. We truly are at the mercy of the Fed regarding the future movements of the dollar. Inflation has just recently broken its downtrend, but continued strength in commodities and developing economies should push inflation higher. Increased inflation is bullish for the U.S. dollar and predicts that economic activity will further increase.
