While the Dollar has rebounded from its lows overnight the action in the Dollar on the charts this week does not mesh with ideas that the Dollar is the dominating go-to safe haven global currency. If one looks back to the weak action in the Dollar following a stellar Non-Farm payroll result last week, it becomes even clearer that the Dollar has become over-valued. Therefore, the Dollar might see the US initial claims readings later this morning as ultra-critical but expectations call for claims to reach back above the headline significant level of 300,000 and without a positive Industrial production result the Dollar could see the beginning of a more significant corrective slide. In fact, there is a debate raging on next week’s Fed meeting on the removal of dovish language from the Fed statement, but the Dollar action this week suggests that global deflation fears are likely to keep the Fed from adding to the Dollar bull’s argument. We think the Dollar is vulnerable to a technical breakdown unless US numbers show definitive growth.
Technical Outlook: Momentum studies trending lower at mid-range should accelerate a move lower if support levels are taken out. The market’s close below the 9-day moving average is an indication the short-term trend remains negative. The market tilt is slightly negative with the close under the pivot. The next downside objective is 87.99. The next area of resistance is around 88.81 and 89.25, while 1st support hits today at 88.18 and below there at 87.99.