State of the dollar's downside correction - BBH

Analysts at Brown Brothers Harriman explained that the US dollar spent the first month of the new year correcting lower after a strong advance in the last several months of 2016.

Key Quotes:

"We argue that the correction actually began in mid-December following the Federal Reserve's rate hike.  Over the last two week, we have been cautioning that greenback's downside momentum was fading and the correction was coming to an end.  We retain that view and have been encouraged by the recent price action. 

The Dollar Index found a base 99.80-99.90. It spent the last session completely above 100 for the first time in a week.  After being essentially flat the first week of the year, the Dollar Index lost 1% in the second week and 0.5% in the third week.  Last week it fell about 0.25%.  The fading downside momentum is not the same thing as a renewed uptrend.  For that, it must move back above the 101.00-101.30 area.   

A small bullish divergence is being seen in the RSI, where the new lows in the index were not matched with new lows in the technical indicator.  The MACDs and Slow Stochastics have not turned, but they have flattened out, which are still consistent with the next significant move being to the upside.  That said, a break of the 99.40-99.60 area would undermine the constructive technical case we have been building."