The US dollar’s technical tone remains poor and market psychology is nearly universally hostile toward it.  Many believe that US Administration is hostile to the international order and rule of law that previous American administrations constructed and advanced. The de-weaponization of the foreign exchange market one of the hallmarks over the past couple of decades may also be jettisoned.  

When US Commerce Secretary Ross said that there are always trade wars, offered valuable insight into the Administration’s mindset. The world is a hostile place and it is dog-eat-dog. There is no global community. Foreign policy is the permanent pursuit of contingent goals, as Henry Kissinger taught. This is so-called realism without the liberalism.

The dollar is as unloved as it has been in years. It is off to its worst start since 1987, when the central banks began trying to stabilize it after the Plaza Agreement in September 1985 driven the dollar lower.

The Dollar Index has approached a key technical area, and although the technical indicators we look at have not turned in its favor, the downside momentum may slow.  The 88.40 area is the 61.8% retracement of the Dollar Index rally that began in mid-2014. The 200-month moving average is found near 88.25.The Dollar Index’s low last week was 88.44. A break below this general area would target 86.25-87.25. 

In a similar vein, the euro, the largest component of the Dollar Index, has also entered a significant technical area. The 61.8% retracement of the euro’s drop from mid-2014 is found near $1.26. The 100-month moving average is near $1.2575. Above there, initial potential extends toward $1.28, which is where the monthly downtrend off record highs comes in(and $1.2780 at the end of February). Technical indicators are stretched and market positioning is extreme. Be on the lookout for a simple reversal pattern to signal a flagging of momentum. A preliminary sign is a close above the previous day’s high, which has not been seen since January 9.