You know the scene I’m thinking about. The one where a former great leader is surrounded by the same people off of whom’s misery he has derived his wealth and power for a long period of time. Now, he lies there, beaten and bloody. Everyone of them wants a piece of him. The poor guy has no where to go. He might not be responsible for everything that went wrong in their lives, but he’s an easy target now, so he gets it.

That dude is the US Dollar right now. The mighty dollar has benefited quite a bit from all the stuff that’s being going on. Falling Equity prices, poor commodity prices, cheap oil,bad economic news (even the ones in the US)…all round fear. It’s all been good for the Dollar. While we have seen some forex market pairs fight back over the last few weeks, last week was quite important.

A couple of things happened that could signal a more powerful shift in trading sentiment. First of all, you have the job numbers in form of Non-Farm Payrolls. They came in at 539,000 jobs. Now that’s lot, no lie. However, it was significantly less than the 590,000 that experts had estimated. This is good. Very good. We then have the results of the Obama Administration Stress tests which were quite interesting. There has been a lot of debate about these tests. There was skepticism by some about whether they were anything more that a PR stunt to cover up what was really going on. No one was really sure what metric would be used to score these institutions. It just didn’t add up. At the end of the day, the tests turned out alright. Some clarity was brought to bear on the financial system. In fact, the results were pretty much what people expected, in terms of the institutions that need help and those that don’t. No major surprises. It has boosted confidence, and it seems pretty clear that there will be no more major bank failures.

The US Government seems to have a plan on how to tackle the issues with the problem companies. If a company is not viable, then it must be restructured. Think Chrysler. Buy outs, Bankruptcy etc. The options are being used. I think more people (myself included) are fully convinced now that these money-sucking pits (supposed companies) will be allowed to fail if that is what it takes. Companies have been given deadlines to raise certain amounts of money, as proof that they can survice. If they don’t, then further steps will be taken. The Administration is now the strict parent. I am not entirely sure that putting a deadline on a drive for funds will work as intended, but it seems alright to investors…at least for now.

So it was a two-hit combo against the dollar last week. For this week, we have retail sales numbers to look forward to. Those are expected to be better. Mind you, this optimism is of the cautious variety. No one wants to jump the gun. However, it seems like the dollar will keep taking a beating. Commodities are on the rise. Oil is going up. Risk appetite is rising. Investors are starting to walk with a skip in their steps. It’s all good.

So, unless the dollar can make like Popeye and suddenly starting whooping everyone’s ass, I think the dollar will lose more ground. Popeye needs spinach to do his magic. Spinach here would be negativity. We are seeing less and less of that these days.

Happy trading.