USD Mid-day Analysis

The freight train rally in the Dollar continues and might not relent without a significant upward extension. The brunt of the run up in the Dollar is the result of the trade factoring in a worsening of the US/European interest rate differential gap and with the official kick off to EU QE earlier this week and at least two Fed members weighing in with hawkish views, a large percentage of the trade is anticipating a June US rate hike. Suggestions from the head of the ECB that the economic data is improving were largely discounted and it would also appear as if the currency trade is poised to discount the release of the Fed’s comprehensive capital analysis later today which might spark some minimal concern toward US banks. However, the Dollar might be expected to garner some support from 4th quarter Services readings but typically quarterly measures (beyond GDP) aren’t given that much credence. Up-trend channel support in the March Dollar index today is seen at 98.74.

Technical Outlook: The market rallied to a new contract high. Studies are showing positive momentum but are now in overbought territory, so some caution is warranted. A positive signal for trend shortterm was given on a close over the 9-bar moving average. The market’s close above the 2nd swing resistance number is a bullish indication. The next upside target is 99.30. The market is approaching overbought levels with an RSI over 70. The next area of resistance is around 99.06 and 99.30, while 1st support hits today at 98.17 and below there at 97.53.