The US dollar appreciated against most of the major currencies last week. The Japanese yen was the chief exception. It rose about 0.5% as US yields remained heavy and equities were mostly softer.

The Dollar Index did not fall in any session last week. It has had one losing session over the past nine, and that was the last day in March when the Dollar Index slipped less than 0.1%. It finished the week a bit above thee 61.8% retracement objective of the decline from last month’s peak (March 9) near 102.25, found just below 101.00 A trend line from the January and March highs is found near 101.40 by the end of next week. It corresponds to the 50% retracement of the Dollar Index decline from the January high, and near the upper Bollinger Band (~101.55 now). The 61.8% retracment of this larger move is found a little below 102. The technical indicators are constructive, and the five-day moving average crossed above the 20-day average for the first time since the Fed hiked rates in the middle of March.

The euro fell about 0.5% against the dollar last week after falling about 1.35% the previous week. It has only risen in three of the past ten sessions. It has been sufficient to push the five-day moving average back below the 20-day average for the first time since March 9. The Slow Stochastics are trending lower, but are approaching zero. The MACDs were turning lower at the end of last week and continued to ease. The RSI is drifting lower. The trend line connecting the January and March lows seen in the $1.0580, which is just above the lower Bollinger Band (~$1.0575), was teased ahead of the weekend. A break would target $1.0500-$1.0525. We had thought potential extended a little above $1.07 last week, but the euro did not get much above $1.0685, where we would now recognize resistance. The euro’s slump is consistent with the wider interest rate differentials as US yields edged higher and German yields eased.

Three times over the past five sessions, the dollar dipped below JPY110.30 to approach significant support around JPY110. This area held in late March as well, but the inability of the sustain modest upticks keeps the greenback vulnerable. There have been 17 sessions since the Fed hiked and the dollar has closed lower in all but four. A break below JPY110 still appears as the pain trade, and optionality and stops would likely be triggered, which could lead to an air pocket. The risk of this lessened at the end of last week as the dollar staged an impressive recovery after initially falling to new lows for the week. Japanese investors may be taking advantage of strong yen to return to global asset markets at the start of the new fiscal year. On the upside, the JPY111.20-JPY111.50 band needs to be overcome, but only to set up a test on more formidable resistance around JPY112.00-JPY112.20. We think there is a reasonable chance that this recovery off JPY110 level can spur a return to the JPY114.00-JPY115.00.