While the Dollar appears to retain fundamental supremacy relative to the Euro, Swiss and Yen, the significant reversal yesterday from a new high for the move in the $ on very high volume is a classic bearish signal. With the up-trend in the Dollar firmly entrenched and the US economy clearly stronger than most alternatives it is really difficult to turn bearish toward the Dollar. However, one could suggest that the Dollar has become overvalued or priced for fairly brisk economic activity. A couple times this week we predicted a huge range up spike in the Dollar in a manner that would leave the Dollar priced for perfection but it may not take perfection to continue to outperform the Euro zone especially in the wake of the ECB once again allowing other central banks to fight the front line battle against deflation. In looking forward the Dollar is a little expensive and it probably needs non-farm payrolls to come in above 230,000 to shoot right back up to this week’s highs. In fact, unless there is a horrible under-shoot on the payrolls it is difficult to expect anything other than temporary back and fill weakness in the Dollar. Even on a severe miss of +175,000 the duration of a slide in the Dollar should be limited. On the other hand, non-farm payrolls above +250,000 probably result in a replication of yesterday’s action, a stiff spike up run toward 90.00.
Technical Outlook: A new contract high was made on the rally. Rising stochastics at overbought levels warrant some caution for bulls. The close above the 9-day moving average is a positive short-term indicator for trend. The daily closing price reversal down is a negative indicator for prices. The market setup is somewhat negative with the close under the 1st swing support. The near-term upside objective is at 89.64. The next area of resistance is around 89.12 and 89.64, while 1st support hits today at 88.15 and below there at 87.71.