The Dollar has come back into some favor as a slight normalizing of sentiment was seen overnight andthat in turn has allowed the markets to resume its factoring of the potential for another Fed taper. The Dollar isheld back somewhat this morning by yesterday’s slack US housing news, but a regaining of the 100 day movingaverage in the Dollar in the early action today might shift the technical condition back in favor of the Dollar bulls.Surprisingly the Dollar hasn’t been held back by news of an impressive jump in UK GDP figures overnight nor wasthe Greenback restricted by a surprise Indian central bank rate hike! Therefore it would appear that the currencytrade is content to buy the rumor off the upcoming Fed decision and that in turn suggests that a portion of thetrade thinks the Fed is locked onto the idea of tapering regardless of underperformance of the US economy andor outside market events. While the Dollar might rally into the FOMC decision, recent US data suggests that theDollar could find it very difficult to take out the mid-January highs without the assistance of the Fed. In the coming36 hours of trade we can’t rule out a near term return to 81.33 in the March Dollar Index but an on-hold Feddecision on Wednesday probably puts the March Dollar index back down to 80.00. With a lack of inflationarypressures, the Fed could easily hold steady, especially with the added burden of emerging markets concerns andUS Debt ceiling uncertainty.
Technical Outlook: Declining momentum studies in the neutral zone will tend to reinforce lower priceaction. The market’s close below the 9-day moving average is an indication the short-term trend remainsnegative. The market has a slightly positive tilt with the close over the swing pivot. The next downside objective is80.30. The next area of resistance is around 80.71 and 80.81, while 1st support hits today at 80.46 and belowthere at 80.30.