Dollar: The headlines this morning trump the fact that the dollar is bordering on the lowest levels in three years and that action seems to be justified by the thread of a US government shutdown. However, as indicated in equity market coverage this morning, traders aren’t really expecting a shutdown. The bull camp might be somewhat relieved that the March dollar index has respected this week’s low in the early action today, especially with the headline pointing out the bitterness in the senate regarding the US debt ceiling. We see no reason to call for an end to the downward track in the dollar but we have to give some credence to the fact that prices have consolidated above the 90.00 level for four days. If the dollar stays below 90.58, it should remain in bearish trend.
Euro: The Euro has seemingly lost upside momentum and run into resistance just above the 1.2342 level this week. German PPI readings overnight were right on expectations and therefore are not a sustained influence on the currency today. There would appear to be critical support in the March euro at 1.2283 and the bias remains up, even if the trade appears to be poised to make an important “trend” decision in the near future. We suspect the euro will see favorable action early on today in anticipation of a protracted Senate debt battle, but that traders will ultimately book profits and move to the sidelines ahead of the weekend.