A range up extension in the Dollar overnight is definitively the result of a more hawkish stance by the US Fed. While the end of QE3 was widely anticipated, the trade did not expect to see the Fed come out withdefinitive confidence in the US recovery. Some of the hawkish spin from the meeting was the result of the longterm desire to get away from extreme policy and therefore the bull case in the Dollar is probably either overstatedor will soon be overstated. In fact, the trade appears to have widely discounted a better than expected Germanunemployment result overnight and given the rise in the Dollar this week, today’s US numbers probably have tocome in distinctly upbeat or the Dollar risks a corrective setback later today. Calls are for US claims to have risenslightly and for US 3rd quarter GDP to post a gain of +3.1% might be needed to keep the Dollar at its recent highshowever, we think position traders should look to buy puts on the Dollar index on a return to this morning’s earlyhighs.
Technical Outlook: Stochastics are at mid-range but trending higher, which should reinforce a movehigher if resistance levels are taken out. The cross over and close above the 18-day moving average indicates theintermediate-term trend has turned up. The outside day up is a positive signal. The market has a bullish tiltcoming into today’s trade with the close above the 2nd swing resistance. The next upside target is 86.77. Thenext area of resistance is around 86.52 and 86.77, while 1st support hits today at 85.65 and below there at 85.01.