Surprisingly the Dollar is off balance this morning despite the presence of a risk-off vibe from renewed turmoil within the EU, slack Chinese import data and from ideas that the US economy is indeed head and shoulders above most others. It is possible that the Dollar was significantly overbought into its January highs, especially with the “combined” spec and fund Net Long position in the Dollar hitting a new record level at 90,560 contracts as of February 3rd. However, the Dollar should be fundamentally underpinned above last week’s lows by stellar US data, economic uncertainty in Europe and by the clear need for even more support from the PBOC. Therefore we see solid support in the March Dollar Index down at 93.68, with up-trend channel support rising to 93.81 today.
Technical Outlook: Stochastics trending lower at midrange will tend to reinforce a move lower especially if support levels are taken out. The cross over and close above the 18-day moving average is an indication the intermediate-term trend has turned positive. A positive setup occurred with the close over the 1st swing resistance. The next downside target is now at 93.29. The next area of resistance is around 95.37 and 95.76, while 1st support hits today at 94.14 and below there at 93.29.