The Dollar is showing some weakness this morning as the ever present deflationary spiral is prompting the trade to doubt the prospect of hawkish wording changes from the Fed. The Dollar Index is approaching a technical failure on the charts and that could accelerate the slide as the trade “sells the rumor” of an unchanged stance by the US Fed. The trade discounted strong US industrial production figures yesterday because other data was soft and a large portion of the trade thinks that even lower oil prices ahead, for the time being, is a sign of return to recession. In other words, the markets are largely seeing the slide in oil as a signal of slumping demand instead of an increase in discretionary income ahead. We can’t rule out a March Dollar index return to the mid November consolidation low zone of 87.64 in the days ahead. In short, the Dollar looks to be headed lower until the US Fed statement is released.
Technical Outlook: Declining momentum studies in the neutral zone will tend to reinforce lower price action. The close below the 9-day moving average is a negative short-term indicator for trend. The close over the pivot swing is a somewhat positive setup. The next downside objective is 88.17. The next area of resistance is around 88.97 and 89.17, while 1st support hits today at 88.47 and below there at 88.17.