News in the Asian session:

With no economic releases from Asia the session has been relatively quiet but retaining a Dollar bearish tone following the late recovery yesterday.

Finance officials have kept up their rhetoric and voicing their concerns about the excessive fall in the Dollar. Juncker considers the move to be irrational as it focuses solely on the short term and that the market is forgetting that although the U.S. is on the verge of a recession the medium term prospects are “excellent”.

From Japan both Nukaga and Ota have commented on the rapid decline in the Dollar following the first decline below 100 since November 1995. Both reiterate that they are following FX moves closely but refuse to comment on specific levels.

Still no comments concerning intervention but that action will come without pre-warning.

The following economic releases are due today:

February
German CPI                              (MoM)    +0.5%
German CPI                               (YoY)    +2.8%
Bank of France Business Sentiment           106.0
Euro-zone CPI                           (MoM)    +0.3%
Euro-zone CPI                            (YoY)    +3.2%
U.S. CPI                                   (MoM)    +0.3%
U.S. CPI                                   (MoM)    +4.2%
U.S. CPI Excl food & energy        (MoM)    +0.2%
U.S. CPI Excl food & energy        (MoM)    +2.4%

March
University of Michigan Confidence          70.4

The expansion supports are at 1.5575 Euro, 100.57 Yen, 1.0079 Swissie and 2.0304 Pound all broke without much of a battle and this does point to a direct move towards the ultimate targets highlighted yesterday at 1.5797 Euro, 98.55-90 Yen, 0.9960-90 Swissie and a more cautious 2.0460 Pound. I would also point out support at a slightly higher level of 99.58.

Now these targets are not too far away and the speed that the market has been moving it could even take one day. Well, I can’t rule out that it may just happen. In trying to work out whether it will, or whether we get a pullback first I am looking at the momentum picture.

In the dailies there is just beginning to be a trace of bullish divergences, not strong and frankly difficult to rely on. The exception is in the Euro. Weekly momentum is pretty uniformly seeing bullish divergences and here the exception is the Pound but we are in a correction higher here so this is not relevant.

Now a momentum divergence isn’t an absolute requirement at a trend reversal but it is comforting. From that basis we should still consider the risk of a modest pullback in the Dollar and it’s not impossible that it could last over today and Monday if the market does suddenly become very slow.

So today we have to play it by ear and even when we do get to see the test of the long term targets it’s probably going to be tough to buy with sentiment as it is. However, it will be best to know whether the levels lie and watch the market reaction in those areas.

One last point – if we see a clean break of more than 50 points I really have to begin looking at alternative structures as the implication would appear to be particularly Dollar bearish to a rather concerning degree…

Note important support and resistance areas:

         USDJPY        EURUSD       USDCHF       GBPUSD
Res:  101.28-54    1.5768-97    1.0234-60    2.0458-60
Res:  100.50-00    1.5660-90    1.0134-60    2.0365-90

Spt:    99.58-75     1.5550-90    1.0015-43    2.0249-82
Spt:    98.55-90     1.5430-73    0.9959-93    2.0156-83

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