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The US Dollar Index rose to its highest level in four months to approach the 61.8% retracement objective of the slide since last December's peak just shy of 100.60. The retracement objective, 97.25 corresponds to the upper Bollinger Band. The Dollar Index closed firmly, and the technical indicators we use suggest that there is scope for additional near-term gains. However, given that pre-referendum the Dollar Index was near 93.00, it is not surprising that the indicators are stretched. This warns a corrective or consolidative phase may be around the corner.

As the single biggest component of the Dollar Index, the euro's technical condition is similar. It spent last week confined to about a once cent range. It was the first week since the end of January that it did not trade above $1.1100. Prior to the referendum, the euro's five-day average was $1.13. Now it stands near $1.1030. The technical indicators suggest the euro may make new lows, but they may be marginal at best. The $1.0915 low recorded in the immediate reaction to the Brexit decision is the next immediate objective. On the upside, $1.1060 was the best the euro could do post-ECB and downtrend line from the June 24 high and mid-July highs comes in near $1.1030 at the start of the new week and finishes near $1.0970.

The dollar pushed higher against the yen and surpassed the JPY106.85 pre-Brexit high before reversing sharply (key reversal on the daily bar charts) on July 21. A month-old (but we think still relevant) interview with BOJ's Kuroda led many to re-think the likelihood of "helicopter money". Despite the bearish price action, there was no follow dollar selling ahead of the weekend against the yen. Technical factors remain constructive and another attempt on the JPY107.50 area looks likely, though a break of JPY105.40 would negate the favorable tone.

Anticipation of BOE easing next month was weighing on sterling, pushing it to $1.3065 when a couple of less dovish (than Governor Carney and the MPC minutes) and talked about the need for more real sector data before agreeing to ease policy. The comments, coupled with favorable pre-referendum data helped sterling recover two cents. Then came the terrible flash PMIs and sterling dropped back to the week's lows. Those lows are important from a technical point of view. They correspond to a 61.8% retracement of the recovery from the July 6 low near $1.28. A convincing break of last week lows would suggest the risk of a retest on the multi-year lows.

The euro pulled back after appreciating sharply against sterling in response to Brexit.  In that pullback it never managed to retrace 38.2% of its rally (~GBP0.8235), and now, technically, looks ready to probe higher again. The immediate cap is near GBP0.8440 and then GBP0.8485. Overcoming these hurdles could encourage a return to the post-Brexit high (~GBP0.8625).

Of the strongest technical signals, the strongest appears to be in the Australian dollar. Even though it did not convincingly penetrate the two-month uptrend drawn off the late-May and late-June lows (~$0.7450), the technical tide appears to have turned lower as the market anticipates a rate cut next month, barring a an upside surprise with this week's Q2 CPI report. The five-day moving average has moved below the 20-day moving average for the first time since early-June. The MACDs have turned lower. The $0.7410 area corresponds to a 50% retracement of the rally from late-May through mid-July. The 61.8% retracement is near $0.7350 and the post-Brexit low was set near $0.7300. A move above $0.7515 would undermine this bearish technical call.

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