As expected the Dollar continues to benefit from the Fed decision to continue extraction of QE3. Sometraders will suggest that they are buying the Dollar because it appears that the Fed is set on a mechanicalremoval of stimulus and that in turn could make the flow of US data less significant. It is also possible that someof the Dollar buying is from speculation of a return of emerging market concerns, as the initial emerging marketfear was reportedly the result of the Fed’s initial tapering move. However, seeing a number of foreign centralbanks react to the Fed’s action has dampened the threat of a rout on specific currencies and it is also possiblethat coordinated central bank action is attempting to cushion smaller currencies around the globe. In the nearterm, the Dollar looks to win by default, but for a full return to the January highs up around the 81.40 level, USGDP or initial claims data might have to give off some evidence of forward motion in the US economy. Estimatesfor the US 4th quarter GDP result later this morning calls for a 3.2% gain and therefore the Dollar bulls might needto see that level or more, just to settle in above the 81.00 level on the charts.
Technical Outlook: The downside crossover (9 below 18) of the moving averages suggests adeveloping short-term downtrend. Momentum studies are still bearish but are now at oversold levels and will tendto support reversal action if it occurs. The market’s short-term trend is negative as the close remains below the 9-day moving average. The market could take on a defensive posture with the daily closing price reversal down.The market’s close below the pivot swing number is a mildly negative setup. The next downside objective is nowat 80.29. The next area of resistance is around 80.82 and 81.05, while 1st support hits today at 80.45 and belowthere at 80.29.