Although the rhetoric from Washington politicians continues to be caustic, there has been a notableincrease in confidence that a US debt default can and will be avoided which is helping the Dollar to consolidateyesterday’s sizable rally. The FOMC meeting minutes showed that most Fed members felt that tapering would beappropriate to start by the end of this year, but their need for sustainable economic progress may not have beenthe “close call” that the market was hoping for if upcoming US data points (when many of them return from theirshutdown sabbatical) do not show consistent improvement given the lasting impact that Washington budgetacrimony may have on the economy. There will some “hard” US data for the market to digest from this morning’sJobless Claims reading, but it may difficult for the Dollar to take out yesterday’s spike high unless the market’sconfidence in a near-term Washington budget resolution is matched by definitive signs of progress. The Dollarmay climb up towards the 80.68 level after today’s Jobless Claims reading, but clearly needs to put Washington’sbudget debacle in its rear view mirror before having any chance of a sustained recovery.
Technical Outlook
USD (DEC): Stochastics are at mid-range but trending higher, which should reinforce a movehigher if resistance levels are taken out. The cross over and close above the 18-day moving average indicates theintermediate-term trend has turned up. The market has a bullish tilt coming into today’s trade with the close abovethe 2nd swing resistance. The near-term upside target is at 81.34. The next area of resistance is around 80.91and 81.34, while 1st support hits today at 80.01 and below there at 79.52.