The US dollar was little changed in the first half of June but fell out of favor in the second half as the market became convinced the Federal Reserve will begin cutting rates in late July and follow it up with two more cuts in H2.  Given then the world’s largest economy continues to expand above trend, with unemployment at a historic low, and financial conditions supportive, it is difficult to envision the market discounting a more aggressive Fed than it has.  According to a recent Wall Street Journal survey, most economists expect two rather than the three rates that are discounted in the fed funds futures and OIS market.

If peak dovishness has passed, with the dollar regain better footing?  What is the dollar’s technical condition as the second half begins?  We seek to shed light on these issues below.