The Dollar is once again back on the defensive this morning, as last Friday’s revival failed to hold through the weekend. Few if any signs of progress out ofWashington are taking their toll on the Dollar, although the market has yet to re-challenge last Thursday’s low for the move. Friday’s comments by Richmond Fed President Lacker may have provided some rhetorical support for near-term tapering, but the Dollar is unlikely to find much in the way of positive Fed commentary until Wednesday’s FOMC meeting minutes release. With the US government shutdown silencing a large portion of the economic data needed for the Dollar to put together any extensive recovery, the market will continue to focus on the ebb and flow of Washington budget discussions for near-term direction. The Dollar may eventually find some safe-haven benefit from this current debacle if this situation continues to deteriorate, but is clearly now playing “third-string” to the Yen and Swiss Franc with receiving any flight-to-safety flows. The Dollar may slide down towards the 79.92 level later this morning, but may be able to avoid falling down into new low ground as long as the market retains some optimism that a US debt default can still be avoided
Technical Outlook
USD (DEC): The crossover up in the daily stochastics is a bullish signal. Daily stochastics are showing positive momentum from oversold levels, which should reinforce a move higher if near term resistance is taken out. The market’s close below the 9-day moving average is an indication the short-term trend remains negative. Since the close was above the 2nd swing resistance number, the market’s posture is bullish and could see more upside follow-through early in the session. The next upside target is 80.63. The next area of resistance is around 80.48 and 80.63, while 1st support hits today at 79.98 and below there at 79.63.