The Dollar flinched in the face of the ECB move on Thursday but then came roaring back as the trade has already started to foment talk of a global currency war. While US scheduled data flows this week haven’t been overly impressive, the bar is low and the US is being given the benefit of the doubt on the continued forward progress in its economy. In looking ahead, the US is expected to post positive readings from leading indicators and Existing home sales and that along with anything positive from the Chicago Fed National Activity index could add to an already explosive rally in the Dollar. In fact, the Dollar has even seen support from Fed dialogue this week, as at least one member remains committed to raising interest rates later this year. The really surprising thing is that the Dollar showed almost reaction to positive economic news from the Euro zone and UK overnight. We get the sense that the Dollar is poised for a strong blow-off type extension.
Technical Outlook: The rally brought the market to a new contract high. Rising stochastics at overbought levels warrant some caution for bulls. The market’s close above the 9-day moving average suggests the short-term trend remains positive. Since the close was above the 2nd swing resistance number, the market’s posture is bullish and could see more upside follow-through early in the session. The next upside target is 96.27. With a reading over 70, the 9-day RSI is approaching overbought levels. The next area of resistance is around 95.68 and 96.27, while 1st support hits today at 93.59 and below there at 92.09.