The US dollar fell against most of the major currencies over the past week. The yen and the Swiss franc were the exceptions.  The technical correction, we anticipated last week, may have some more room to run.  However, we do view it as a counter-trend move and expect the data to show the US economy picked up some momentum going into the end of Q1.  If recession fears are exaggerated so too are expectations that the Federal Reserve will cut rates.  An adjustment of such expectations can be the fuel of the next leg up for the dollar.

Dollar Index:  The Dollar Index tried one more time to push through the 97.50 area at the start of last week and gave up and retreated to about 96.75, where the 50-day moving average is found, ahead of the weekend.  It traded below its 20-day moving average (~96.90) for the first time this month but managed to close just above it.  The move that we think is being corrected began ironically with the low on March 20 when the FOMC last met and the Dollar Index posted an outside down day.  But there was no follow-through, and before the past week, it had risen in the nine of the 12 sessions after the FOMC meeting.  It had retraced 38.2% of the move by the middle of last week (~96.85) but before the weekend, made a push lower toward the 50% retracement (~96.65).  The 61.8% retracement is found about 20 ticks lower.  The five-day moving average (~97.02) is poised to fall below the 20-day moving average (~96.90), which may be a useful proxy for some models.  The technical indicators we look at also suggest scope for more declines.  Waiting for some sign of a reversal may be preferable to trying to catch the falling knife. That said, on a risk-reward basis dip below 96.50 would look attractive.