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As we expected, the dollar stayed on track and made further gains. Data out of the EU and the US put pressure on short dollar positions and a flight to safety continued, along with declining equity prices. Durable Goods Orders and New Home Sales out of the US came in below expectations; fundamentally this would hurt the dollar but in recent months, bad data has helped the dollar as investors and traders fear that the recovery analysts are talking about may not be so quick, so money flows back into US denominated assets such as treasuries. We are biased for more dollar gains in the short term. We think the Euro will find a bottom near 1.45 and will not fall below 1.4380. We still expect the Yen to be the big winner this year, falling to 87 or 85 before the dollar finds support.
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