The dollar continued to rally in pre-Easter holiday trading despite today's mixed US economic data. Nearly all of markets around the world will be closed for Good Friday tomorrow, which means that the dollar ended this shortened trading week with phenomenal strength. The biggest question that is on the minds of traders at the moment is whether the euro has more room to fall or if we are nearly done with this painful reversal. Taking a look at some of the interbank research that we have access to, economists from the world's leading banks have not backed away from their weaker dollar, stronger euro forecasts. Technicals and positioning on the other hand indicate otherwise. The latest FXCM Speculative Sentiment index remains in positive territory, which if taken as a contrarian indicator (as it usually is), indicates that the sell-off may continue for a bit longer, especially since the next major area of support is not until 1.2750/1.2800. Fundamentally, the dollar is benefiting from the Fed's aggressive tightening measures. However, not much has really changed over the past week. The Fed was eventually going to drop the phrase measured and took a baby step towards doing it on Tuesday. They nodded to the rising inflationary pressures, which is recognition of the impact of higher energy prices. The Fed has previously indicated that they plan on bringing rates back to neutral (approx 3.5-4.0%) and based upon current fundamentals, there is little evidence that the Fed will surprise with a 50bp rate hike at this time. Therefore in retrospect, it seems that even though the dollar had such a strong move this week, the catalyst for the move was something that the market had anticipated even before the Fed meeting.