The Dollar made a sizable gap-lower opening last night, and while bouncing off of fresh 31/2-week low it remains on the defensive coming into this morning’s trading. Yesterday’s news that Larry Summers withdrew his name for consideration as the new Fed Chairman clearly surprised global markets, and has put a much more “dovish” Janet Yellen as the new favorite for the job. Friday’s lukewarm Retail Sales data and soft Consumer Sentiment readings also eroded residual support from multi-year lows in Jobless Claims, and that has left most markets all but pricing in a $10 billion initial cut to Fed tapering at Wednesday’s FOMC meeting. A decent Industrial Production reading will help, but the Dollar has plenty of work ahead of it in order to regain strong upside momentum in front of the FOMC meeting. The Dollar may extend this rebound up to the 81.50 level later this morning, but will likely need positive US data today and tomorrow just to fill in and move above last night’s chart gap opening. The Commitments of Traders Futures and Options report as of September 10th for US Dollar showed Non-Commercial traders were net long 21,008 contracts, an increase of 9,230 contracts. The Commercial traders were net short 28,283 contracts, an increase of 8,514 contracts. The Non-reportable traders were net long 7,274 contracts, a decrease of 718 contracts. Non-Commercial and Non-reportable combined traders held a net long position of 28,282 contracts. This represents an increase of 8,512 contracts in the net long position held by these traders.
Technical Outlook
USD (SEP): Stochastics trending lower at midrange will tend to reinforce a move lower especially if support levels are taken out. A negative signal for trend short-term was given on a close under the 9-bar moving average. The market’s close below the pivot swing number is a mildly negative setup. The next downside objective is 81.22. The next area of resistance is around 81.64 and 81.84, while 1st support hits today at 81.33 and below there at 81.22.