The US dollar strengthened following the midterm election and the Federal Reserve’s signal that it intends to continue gradually hiking interest rate. The Antipodean currencies have been the strongest over the past month and the past week. The New Zealand dollar gained 1.6% to lead the majors higher over the past week, which brings to a 4.3% gain over the past month. The Australian dollar was up about 0.6% for the week and 2% over the past month. Both central banks met, but neither signaled the likelihood of higher rates any time soon, and the clear divergence from the Fed may signal the end of their bounces. 

 The Canadian dollar and Norwegian krone were the weakest of the majors, losing about 2/3 of one percent. Softer than expected inflation from Norway ahead of the weekend accounted for the bulk of krone’s decline. Some jitters about NAFTA 2.0, the drop in oil prices and softer equity prices appeared to be the main drags on the Canadian dollar. Last week, we had expected a continuation of the uneven downside correction in the dollar. This mostly materialized in the first half of the week, while it appears to have ended, though technical confirmation is still awaited.  

Dollar Index 

The Dollar Index was virtually flat on the week. That means it recovered from the decline that took it to near 95.65 in the middle of the week and ended the week with the highest close since the year’s high was recorded on October 31 near 97.20. The 96.00 area that has been gravitating around marks the halfway point of last year’s decline. The next significant retracement level is found near 98.00. The technical indicators, however, are not generating strong signals, warning choppy conditions may prevail.

Euro

The euro’s recovery fizzled at $1.1500 in the middle of last week, and it quickly returned to the lower end of its range. Consider the low for the year was set on August 15 1/100 of a penny above $1.13, according to Bloomberg. The euro returned within 1/100 of a penny of that low at the end of October. The low before the weekend was about $1.1325. The 200-week moving average is almost $1.1315. The euro has not  hit this moving average since just after the US election in November 2016. Neither the weekly nor the daily technical indicators suggest a sustained break lower is imminent. The $1.1450-$1.1500 area is still expected to contain bounces.