Greenback Breaks Down

The US dollar fell against all the world's currencies last week. Although most of the G10 central banks have what can be considered easing biases, the dollar is most vulnerable because there is so much more scope to ease and its strength had been in no small measure predicated on monetary divergence.  

It is striking that the dollar did not rally although geopolitical tensions are elevated.The half dozen ship attacks in the Gulf in as many weeks, the US apparently was closer to a limited military strike on Iran than many realized, and the high-stakes meeting between Trump and Xi a week away.  

Gold seemed to capture both themes:lower for longer in rates and geopolitical tensions.The precious metal rallied 4.3% last week, the most in three years, to reach a six-year high above $1400.It has pushed through the neckline of a large head and shoulders bottom pattern which projects toward $1700. 

Dollar Index:Last week's 1.4% decline was the largest in four months.The 200-day moving average has been toyed with, but this seems to be a convincing break (200-day is ~96.60 vs. close ~96.20), barely inside the lower Bollinger Band.The 96.30 area corresponds to the (61.8%) retracement of this year's gains.The technicals leave room for additional losses, and the 95.60-95.75 offer a reasonable near-term technical target that houses the (April-May) double top (~98.40) objective and the March lows.Bounces may be limited to the 96.50-96.70 band.  

Euro: The euro's 1.4% gain last week likely secures an end to the string of monthly losses.June will probably be the first month this year that the euro has not fallen.It reached a three-month high near $1.1380.It closed above its 200-day moving average for the first time since May 2018.For the seventh week, the euro alternated in a sawtooth pattern between gains rising and declining.It is close to its upper Bollinger Band (~$1.1375), but the momentum indicators do not suggest a top is at hand. The near targets are $1.1400 (psychological round figure) and~$1.1450, the March high. 

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Read more by Marc on his site Marc to Market.

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