While the Dollar is lower to start this morning it is possible that the reversal is largely the result of ashort term overbought condition into yesterday’s highs. In fact, some traders might argue that US data yesterdaywas generally strong enough to justify ongoing gains in the Dollar relative to the Euro. On the other hand, it ispossible that the application of fresh Russian sanctions is being seen as a negative to the Dollar, as the US hasonce again taken a harder line stance than its Euro partners. Therefore the promise of retaliation against the USmight be providing a measure of pressure for the Dollar. Expectations call for a minor rise in US claims and aslight decline in a Philly Fed business outlook later this morning and that might be contributing to some long profittaking in the Dollar. In retrospect, the majority of the recent strength in the Dollar has been the result of weak Eurozone data and hawkish Fed views and both of those story lines are dissipating. With soft data, the SeptemberDollar might be poised to slide back toward support of 80.47.
Technical Outlook: Momentum studies are trending higher but have entered overbought levels. Themarket’s close above the 9-day moving average suggests the short-term trend remains positive. Marketpositioning is positive with the close over the 1st swing resistance. The next upside target is 80.81. The next areaof resistance is around 80.74 and 80.81, while 1st support hits today at 80.51 and below there at 80.35.