The Dollar made a modest attempt towards building onto yesterday’s late recovery, but has since fallen back on the defensive heading into this morning’s trading. The ongoing US government shutdown continues to be the main source of pressure for the Dollar, as the rising chances that this situation may combine with an acrimonious debate on raising the US debt ceiling over the next few weeks have severely diminished the chances that the Fed will pull the tapering trigger at this month’s FOMC meeting. This week’s US economic data has generally held onto a positive tone but with the government’s releases “on furlough” during the shutdown – including Friday’s critical Non-Farm Payroll number – traders may only have today’s ADP jobs survey and tomorrow’s ISM non-Manufacturing survey to provide additional support for the Dollar through week’s end. Comments by Fed Chairman Bernanke later today may also be problematic for the Dollar, as he is likely to take a dim view of recent events in Washington given his previous statements on “fiscal drag”. The Dollar may find enough of a boost from overseas safe-haven support and the ADP reading to climb up towards the 80.38 level later this morning, but will remain rooted within its post-FOMC trading range until there is some near-term resolution of the Washington budget debacle.
Technical Outlook
USD (DEC): Daily stochastics declining into oversold territory suggest the selling may be drying up soon. A negative signal for trend short-term was given on a close under the 9-bar moving average. The market tilt is slightly negative with the close under the pivot. The next downside target is now at 79.78. The 9-day RSI under 30 indicates the market is approaching oversold levels. The next area of resistance is around 80.49 and 80.68, while 1st support hits today at 80.05 and below there at 79.78.