The Dollar rally has been so impressive over the last two months that a slight corrective setback has been given some attention. We continue to think that the Dollar bulls have all the cards but that the Dollar should find it increasingly difficult to extend on the upside unless US data shows positive progression and or at the very least the majority of the data is positive. In fact, seeing European equities hit fresh 2 year highs this morning, in the wake of favorable German data yesterday was justification for a temporary pause in the Dollar rally. Critical
pivot point support in the Dollar is seen today at the overnight low of 88.13 and with a rather active flow of scheduled data this morning, traders should brace for the most significant volatility of the week directly ahead. Expectations call for generally positive data from GDP, private home prices and Consumer Confidence readings and therefore pushed into the market, we would be long the Dollar for a quick return to the recent highs.
Technical Outlook: A new contract high was made on the rally. The daily stochastics have crossed over up which is a bullish indication. Daily stochastics have risen into overbought territory which will tend to support reversal action if it occurs. The market’s short-term trend is positive on the close above 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 near-term upside target is at 88.62. The next
area of resistance is around 88.36 and 88.62, while 1st support hits today at 88.00 and below there at 87.89.