What will it take to arrest the dollar's slide? - BBH

Analysts at Brown Brothers Harriman explained that it is not clear at this juncture what it will take to arrest the dollar's slide.  

Key Quotes:

"As we discuss below, the technical indicators are stretched, but the momentum remains strong.  Many of the currencies settled softly ahead of the weekend, but it might not signify anything but the uncertainty ahead of the weekend that will see the US government close what it considers non-essential functions due to the failure of Congress to agree to authorize the government to spend money and the SPD conference in Germany that will decide if the party will engage Merkel's CDU/CSU block in negotiations to form a new government (now four months since the election).

If the dollar's slide is being fueled by speculation of policy shifts by the ECB and BOJ, then the central bank meetings in the week ahead by spur some caution.  The interest rate differentials have widened in the US favor, which makes it expensive to be short the dollar if the momentum is not sustained.  Given market positioning, and the extended technical condition, we are on the look out for technical reversal patterns. 

The Dollar Index's latest leg down began five weeks ago from around 94.00.  It approached 90.00 in recent days and has chopped as high as 91.00.  The RSI, MACDs, and Slow Stochastics are still moving lower on both the daily and weekly studies.   The move below last September's low (~91.00) is significant and could be the last phase of the a five-part move lower from the start of last year.  That said a break of 90.00 would strengthen the conviction of a move toward 88.40 to complete a 61.8% retracement of the Dollar Index rally beginning in mid-2014."