The Dollar remains the safe haven destination of choice early this week as events in Greece, Ukraine and the Middle East are fueling a moderate risk-averse tone across global markets. With a sizable pullback from the new multi-year high seen during early Asian trading, however, potential longs should keep in mind that the Dollar may not require significant added pressure to fall into negative territory. While recent US economic data has been mixed with few positive highlights, the Dollar is clearly in a stronger position than most of the world’s major currencies. Overseas risk events and recent talk of “currency wars” may give some pause for thought at this week’s FOMC meeting, but the Fed is still much closer to hiking rates that other major central banks. Even so, the Dollar had gained more than 2.70 points from Wednesday’s close to the overnight high, which leave considerable room for further downside price action this morning. With little in the way of top-tier US data for the market to digest until Tuesday, overseas events and risk aversion should provide the Dollar with underlying support. However, the Dollar Index’s “combined” spec and fund Net Long position hit a new record high level at 88,982 contracts, which will keep the Dollar vulnerable to long liquidation early this week. The Commitments of Traders Futures and Options report as of January 20th for US Dollar showed Non-Commercial traders were net long 72,897 contracts, an increase of 1,211 contracts. The Commercial traders were net short 88,982 contracts, an increase of 1,790 contracts. The Nonreportable traders were net long 16,085 contracts, an increase of 581 contracts. Non-Commercial and Nonreportable combined traders held a net long position of 88,982 contracts. This represents an increase of 1,792 contracts in the net long position held by these traders.
Technical Outlook: The market rallied to a new contract high. The daily stochastics gave a bearish indicator with a crossover down. Momentum studies trending lower from overbought levels is a bearish indicator and would tend to reinforce lower price action. The close above the 9-day moving average is a positive short-term indicator for trend. The close over the pivot swing is a somewhat positive setup. The next downside target is 93.75. The 9-day RSI over 70 indicates the market is approaching overbought levels. The next area of resistance is around 95.98 and 96.59, while 1st support hits today at 94.57 and below there at 93.75.