The United States and Japan seemed to have recently entered a race to see which country can make their currency the weakest in the world. The US implicitly with low targeted interest rates and forecasted bond purchases. Japan explicitly with outright foreign exchange purchases.
The currency emerging strong from these governmental currency strategies is the euro. This is not good news for those hoping for lower energy prices.
Key technical signals, especially the head and shoulders on the US dollar index chart, are leading many longer term trend traders to put on or add to long euro positions. The euro will likely continue trending higher for the next 7 to 12 months.
Unfortunately, the main reason the euro will not trend longer than 1 year will be due to another worldwide recession causing traders to flee back to the safety of the US dollar. The recession will be partially caused by higher energy prices.
The consequences for crude and its refined products will be slowly building price inflation. We are likely to see crude break out of its trading range to pop its head above the $90 level. Participants will remember that it was a strong euro the took crude to $149.
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