Uncle Sam Signal

Currency traders must be getting whiplash. The dollar hit new lows against the euro Tuesday than sharply reversed direction on speculation that higher interest rates are ahead.

I’m not too excited by the dollar's action, says Joe Terranova on Fast Money. Personally, I’m not sure the dollar will get much stronger. I’ve tried to play the dollar from the longside and I don’t think it works.

Also, if we proceed with a massive liquidity for Fannie and Freddie that would be dollar bearish, adds Karen Finerman.

However, there's also a case to be made for dollar bulls; higher interest rates may be on the horizon. That belief was reinforced Tuesday by Charles Plosser, president of the Federal Reserve Bank of Philadelphia and a voting member of the Fed's Open Market Committee, who said the Fed will probably need to boost interest rates "sooner rather than later," even if employment and financial conditions haven't improved.

"Inflation is already too high and inconsistent with our goal of — and responsibility to ensure — price stability," Plosser said in a speech to a group assembled by the Philadelphia Business Journal.

A reversal on interest rates "will likely need to begin before either the labor market or the financial markets have completely turned around," he said.

Should be interesting!

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Trader disclosure: On July 22, 2008, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Najarian Owns (AAPL), (AMLN), (C), (CHK), (ETFC), (TSO), (ICO): Najarian Owns (CSCO) Calls, (MRK) Calls, (YHOO) Calls, (HUN) Calls; Macke Owns (GS), (WMT), (MSFT): Finerman Owns (GS); Finerman's Firm Owns (MSFT), (SUN), (TSO), (VLO), (M); Finerman's Firm And Finerman Own (C) And (C) Leaps; Finerman's Firm Is Short (BBT), (WB), (IYR), (IJR), (IWM), (SPY), (MDY); Finerman's Firm Owns (HUN) Calls: Terranova Owns (BNI), (SA), (VLO), (RIMM), (CME), (FCX), (GOOG), (INTC), (IYT), (XLF), (SU), (YHOO); Terranova Is Long September Crude Oil $154 Calls; Terranova Is Short September Crude Oil $130 Puts; Terranova Is Short September Crude Oil $130 Calls;

Terranova Is Chief Alternatives Strategist Of Phoenix Investment Partners, Ltd.; Terranova Is Co-Portfolio Manager Of The Phoenix Diversifier PHOLIO; Phoenix Investment Partners Owns More Than 1% Of (DBV) ,(RWX), (LNET) ,(EXR), (SKT) ,(DLR) ,(IGE) ,(ARE) ,(DBC) ,(ABD) ,(OFC) ,(CLB) ,(BLV) ,(CNTY) ,(FL) ,(HPC) ,(PSPT) ,(ESS) ,(OIIM) ,(BIG) ,(ENG) ,(PFD) ,(DRH); Phoenix Diversifier PHOLIO Owns (IGE), (DBC), (DBV)Charles Schwab Is A Sponsor Of "Fast Money"