USD: Scope for additional near-term gain - BBH

Research Team at BBH, suggests that the main drivers in the foreign exchange market can largely be found in developments outside the US. 

Key Quotes

“Rate cut expectations in Australia and New Zealand, for example, weighed on their respective currencies.  Speculation of "helicopter money" in Japan undermined the yen, until many participants accepted that BOJ Governor Kuroda's June comments noting the BOJ purchases of bonds directly from the government is banned. 

Sterling was taken down by signs that despite the residual strength before the referendum, there has been a significant hit in sentiment, picked up in the flash PMIs.  Draghi said little new at the press conference following the ECB meeting, which left the euro stuck around the $1.10-level.

The US Dollar Index rose to its highest level in four months to approach the 61.8% retracement objective of the slide since last December's peak just shy of 100.60.  The retracement objective, 97.25 corresponds to the upper Bollinger Band.  The Dollar Index closed firmly, and the technical indicators we use suggest that there is scope for additional near-term gains.  However, given that pre-referendum the Dollar Index was near 93.00, it is not surprising that the indicators are stretched.  This warns a corrective or consolidative phase may be around the corner."