A Look At The Charts

The US dollar was mixed against the major currencies last week.The dollar-bloc currencies and the Japanese yen fell,while the other major currencies rose, led by sterling (1.1%) on ideas that the risk of a no-deal Brexit was diminished, and the Swedish krona (0.9%) that was bolstered by 1.2% growth in Q4, quarter-over-quarter (around twice what economists expected).

Dollar Index

The Dollar Index rose in February by nearly what it lost in January, leaving it little changed net-net on the year. It closed last week on a firm note, having posted its last decline on Tuesday. It had fallen to a three-week low (~95.80) on Thursday before reversing higher and closed the week at the 20-day moving average and at its best level since February 21 (~96.50). The drop signaled by the key reversal on February 15 appears to have been completed last week. The 96.60 area represents the halfway point of the decline. The Fibonacci 61.8% retracement is closer to 96.80. Despite the strong close at the end of the week, the MACDs and Slow Stochastics have not turned higher.There are two implications. First, there is scope for a pullback in the first part of the week. Second, the indicators may turn higher from elevated levels warning of the risk of only a modest leg up on what we expect to be favorable developments at the end of the week for the dollar. 

Euro

Starting last Tuesday, the euro traded above $1.14 for the first time since February 5, and although it did so for the following three sessions, it never was able to close above it. In fact, judging from the price action, participants took advantage of the single currency resurfacing the middle of the $1.13-$1.15 range to sell it, and the closes were consistently near the lows in the last three sessions.The trendline connecting the early and late January highs comes in a little above $1.1420 at the end of next week. That would seem to denote the risk for euro bears. With the pullback, the euro has retraced 38.2% of the recovery off the year's low set on February 15 (~$1.1235). The 50% retracement and the 20-day moving average are found in the $1.1325-$1.1340 area. The technical indicators have been muted by the broad sideways activity that is illustrated by the low volatility and the convergence of the 50 and 100-day moving averages (just below $1.1390). The euro ended 2018 near $1.1465. It slipped roughly 0.15% in January and 0.65% in February.

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Read more by Marc on his site Marc to Market.

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