Last week's big news was undoubtedly the dollar's plunge in the wake of the publication of a weaker-than-expected CPI index. What's that got to do with anything? For several months, the dollar index had been stabilizing above the 100.80 mark on the back of uncertainty over the future of US monetary policy. Now, however, the outlook has brightened for the probable end of the rate hike cycle, making the dollar less attractive against its peers. The chart below clearly shows the consolidation pattern between February and July, whose recent breakout from the bottom points to a new bearish cycle, with a first target around the 95 mark before considering a return to the 2021 lows at 89.65/20. If you are invested in U.S. currency, it would be a good time to think about protecting yourself against this predicted decline. If you have dollar-denominated cash, we would also urge you to seriously (re)consider your allocation.

(Source: Bloomberg)

Which currencies do you prefer? You're spoilt for choice. Euro is the currency of choice, and the Swedish krona would also be a good option, as the USDSEK has retraced well below 10.9128 and is already approaching horizontal support at 10.16. Should a rebound materialize at this level, it should only be temporary before considering a more ambitious target at 9.65.

Commodity currencies are also recovering strongly, and are currently testing 0.6390 on the Kiwi and 0.6879/0.6900 on the Aussie. A breach of these levels will open up targets around 0.6500 and 0.7121 respectively.