The powerful divergence theme re-emerged and effectively ended the dramatic correction throughout the capital markets. 

The FOMC statement strengthened conviction of a mid-2015 lift off, even if the pace of tightening may be somewhat slower than previously anticipated. At the same time, the Swiss National Bank's decision to move to negative interest rates, partly in anticipation of the ECB expanding its asset purchases as early as next month, underscores that Europe remains well behind the US in the credit cycle.

Rather than attribute the downdraft in the dollar and equity markets to a shift in underlying fundamental drivers, we had seen the hand of a technical correction, driven by short-term market positioning, and aggravated by year-end portfolio adjustments.     Indeed the euro peaked within a few ticks of the 50% retracement objective of its losses from the October 15 high near $1.29. For its part, the dollar's dramatic slide against the yen stopped just shy of a key retracement objective of its rally from both October 15 and October 31 that was found near JPY115.50.

We expect the dollar's higher trend to continue.  However, the lack of participation over the next two weeks could obscure this trend.    The Dollar Index made a new high before the weekend near 89.65.  A move above 90.00, which has held back previous dollar bounces since the onset of the Great Financial Crisis, would signal an acceleration of the dollar ‘s advance.   Initial support is pegged in the 88.80 area.   

The euro recorded a new low for the move just before the weekend near $1.2220.   A break of $1.2200 would suggest losses toward $1.20.  It has not been able to resurface much above $1.2300 since breaking below in response to the SNB's decision. 

Technical indicators suggest the dollar's uptrend against the yen will resume.  The move above JPY119.50 strengthens the conviction that the greenback is on its way back to the December 8 high near JPY121.85 and beyond.   Initial dollar support is seen in the JPY118.50-80 area.