Dollar looking stretched? - BBH

Analysts at Brown Brothers Harriman explained that the technical indicators warn that the US dollar is stretched, but the combination of disappointing auto sales and jobs report may deny it the interest rate support needed to facilitate a resumption of the bull market. 

Key Quotes:

"While there are many observers talking about the abdication of the US from its global leadership role given the decision to pull out of the Paris Accord and the TPP, we think the dollar's performance can be explained by changing perceptions about the pace of US economic activity, the direction of inflation, and prospects for significant tax reform and infrastructure spending.   

There is a light US economic calendar in the week ahead, and the quiet period ahead of the June 13-14 FOMC meeting means that investors are unlikely to get much guidance from officials. The focus will be squarely on Europe with the ECB meeting and the UK election.   

The Dollar Index finished the week at new lows for the year, and just above the 61.8% retracement objective of the rally from the lows seen in May last year (96.45). A convincing break brings two technical levels into view. The first is around 95.20. It is a measuring objective of the old head and shoulder pattern that had been formed between December 2016 and March 2017. The second is near 94.20. It is the 38.2% retracement objective of the Dollar Index's 2012-2014 lows near 78.60."