By Jim Donnelly, Olson Global Markets

Despite efforts by European leaders to curb their sovereign debt crisis and save the euro the last week, an undercurrent of doubt helped the U.S. dollar index (DXY) edge higher. Skepticism that the European Commission will be successful in forcing member nations to follow strict budgetary guidelines will likely persist. This is due, in large part, to the prolonged Eurozone bickering that has jolted global markets from time-to-time over the past 18 months.

The perception that U.S assets offer a sense of stability has been supported by a stream of favorable economic news in recent months. Moreover, expectations that the Eurozone is might already be in a recession has also bolstered the U.S. Dollar as well.

From a technical point-of-view, it is interesting to note that long term (monthly) oscillators are positioned bullishly on the U.S. Dollar Index (DXY). In addition, it appears that a break above key trend line resistance at the 79.90 level could lead to a possible extension up to the 87 area.

The problem with this scenario, however, it that if a more pronounced bullish move in the greenback were to occur, the upside prospects for both U.S. equity and commodity prices would likely be muted over the foreseeable future.

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