The $US Dollar Index

The US dollar is playing an increasingly important role in financial markets at the moment as the world loses some confidence in the Greenback. On the macro level, as we saw overnight with the US Treasury auction, global fund managers are demanding higher yields to tie up capital in US dollar-denominated assets, which in this case led to a rough session on Wall Street. These concerns have driven gold to new highs over recent years as a better safe haven alternative. Our preferred scenario is that the $US tests the 97 area before bouncing back towards 102; such a move would likely drive new highs in gold, followed by a period of consolidation.

• The $US Index can test the 97 level in the coming weeks, but it will probably not follow through this time around given the world is now negative the $US and positioned accordingly.