Sterling was the only major currency to have a worse week than the US dollar. Prime Minister May may have secured the wording for an agreement in principle with the EC and managed to get a majority of the cabinet to support it, but seems increasingly unlikely to pass the last hurdle, Parliament. US President Trump dangled the possibility of easing trade tensions with China in front of investors who were primed to take the bait. Expectations of the trajectory of Fed policy next year are in flux. The implied yield of the December 2019 fed funds futures fell 15 bp last week to 2.75%, the lowest close in ten weeks.    

Australian Dollar  

The US dollar finished the week on a soft note, and once again, the Australian and New Zealand dollar’s led the move. Their pullbacks at the end of the previous week did not mark the end of their upside corrections as we had thought. Instead, both extended their rallies. The Aussie reached three-month highs before the weekend (~$0.7335), while the Kiwi was at levels not seen since June (~$0.6880). The 200-day moving average will begin the new week near $0.6890, and the New Zealand dollar has not closed above in seven months. The Aussie’s push above the $0.7280 area faces little chart resistance until the $0.7400-50 area, where its 200-day moving average and retracement objectives of this year’s decline can be found. While the MACDs and RSI are constructive, the Slow Stochastics have turned down. The other technical note of caution comes from the Bollinger Band, where the upper band (+ 2 standard deviations from the 20-day moving average) is nearby, a little above $0.7340. 

Dollar Index

Since the end of September, the Dollar Index has had three distinct legs up of around 200-220 points. Each has been followed by a pullback (correction) of 130-160 points. It fell about 0.5% last week to end a four-week advance. The trendline of the correction lows begins next week near 96.15, where the initial retracement of the larger advance from late September can also be found (~96.20). Below there is the low for the month around 95.65. The RSI and MACDs did not confirm the last high and have turned down, leaving a bearish divergence in the wake.