The US dollar has bounced back smartly from the disappointing Q2 GDP data and initial jobless claims.  The stronger than expected Chicago PMI, a Q3 report, helped.  There has also been a pullback in oil and a recovery in equities. 

The seems to be a subtle shift in market behavior.  The short-term market seems more inclined to buy dollar pullbacks rather than sell rallies as previously seemed to be the case. 

The euro pushed through the resistance levels identified yesterday but has seen retreated back well below the 100-day moving average and retracement objectives.  Sterling also rose through upper end of the resistance band we identified at $1.9870-$1.9910, but has also come off sharply and is now lower on the day.  A break of yesterday’s low, at a distant $1.9746 would be a very bearish developments. 

The dollar briefly traded below JPY107.75 support, but has since bounced back to resurface above JPY108.  The week’s range:  JPY107.35-JPY108.35 continues to confine prices. 

Still, it is important to keep in mind that the week’s event risks have not passed.  Tomorrow sees the US employment data and euro-zone PMI.  Medium and longer term investors need not reach some major conclusion about the price action and underlying trend today.  That said, our reading of the technical and fundamental factors point to a potentially significant shift in sentiment in the dollar’s favor.