Somewhat impressively the Dollar has managed to hold above the prior session’s close in the face ofaggressive foreign central bank action to quell the emerging market threat. More than likely the Dollar is garneringsome residual lift from anticipation that the US Fed will continue to pull down their asset purchases. Some mightsuggest that US data was generally supportive yesterday but the data as a whole was questionable. On the otherhand, US Treasuries seemed to come away from yesterday’s data with a bearish track and that in turn might haveprovided the Dollar with some lift. Limiting the Dollar strength this morning is another round of favorable GermanConsumer Sentiment readings and the idea that key foreign central banks aren’t going to stand by casually andallow a currency crisis to unfold. We think the odds of more tapering are high but they have been reduced by thepotential emerging markets threat. On the other hand, the PBOC and other foreign central banks have shownproactive action and that could free up the Fed to go ahead and taper even though US data hardly justifies moreextraction. In short, the Dollar might rally today but we think that action can be sold as a fresh taper move couldbe seen as a move that makes it more difficult for the US economy to gain momentum. Seeing the Fed holdsteady probably puts the March Dollar Index down to 80.00.
Technical Outlook: Momentum studies are declining, but have fallen to oversold levels. A negativesignal for trend short-term was given on a close under the 9-bar moving average. It is a mildly bullish indicatorthat the market closed over the pivot swing number. The next downside objective is 80.28. The next area ofresistance is around 80.82 and 81.01, while 1st support hits today at 80.45 and below there at 80.28.