The Dollar appears to have peaked out overnight as a move to new highs failed to hold. While US data wasn’t overly disappointing last week, data from outside of the US was soft and that in turn should provide the Dollar with a residual measure of support. In fact, weak Chinese data overnight and more weakness in crude oil prices would seem to suggest that the broad-based deflationary bias is expected to remain in place and that should mean the trade will generally seek the safety of the US Dollar. In fact, a Japanese rating cut combined with the Russian currency touching a fresh all time low against the Dollar overnight suggests that the Dollar is generally poised to win by default. Therefore on a correction to up-trend channel support on the charts of 87.79 traders should become a buyer of the US Dollar. We suspect that US data might facilitate an initial further slide in the Dollar, as the ISM data later this morning is expected to be soft and there will be a number of Fed speeches just after mid-session today that could provide promises of assistance against a developing deflationary threat.
Technical Outlook: The daily stochastics have crossed over up which is a bullish indication. Positive momentum studies in the neutral zone will tend to reinforce higher price action. The intermediate trend could be turning up with the close back above the 18-day moving average. The market has a bullish tilt coming into today’s trade with the close above the 2nd swing resistance. The near-term upside target is at 88.77. The next area of resistance is around 88.64 and 88.77, while 1st support hits today at 88.19 and below there at 87.86.