Although it has pulled back from the overnight highs, the Dollar has managed to hold onto a sizableportion of Thursday’s recovery rally heading into the final session of the week. Yesterday’s Retail Sales readingmay not have been a spectacular “beat”, but was certainly positive enough in tone to provide further support for anear-term Fed tapering case that was boosted by a US budget deal and by reports that Stanley Fischer would benominated for Fed Vice Chair. Inflation will be one of the Fed’s key gauges for any tapering decision, so today’sPPI reading will be a critical factor in whether the Dollar can build on current upside momentum. A surge inoverseas risk aversion from official Chinese comments that their economy faces “downward pressure” mayprovide an additional source of strength this morning, but the Dollar will clearly need to find support at home inorder to finish off the week with a sizable upside move. The Dollar may climb up towards the 80.58 level later thismorning, but will have little tolerance for lukewarm PPI numbers later in the morning.
Technical Outlook: A bullish signal was given with an upside crossover of the daily stochastics. Dailystochastics are showing positive momentum from oversold levels, which should reinforce a move higher if nearterm resistance is taken out. The market’s close below the 9-day moving average is an indication the short-termtrend remains negative. A positive setup occurred with the close over the 1st swing resistance. The near-termupside target is at 80.51. The next area of resistance is around 80.37 and 80.51, while 1st support hits today at79.98 and below there at 79.72.