To enable prompt collapsing in agnoster, replace the prompt_dir() with
prompt_dir() {
prompt_segment blue black $(pwd | perl -pe "
BEGIN {
binmode STDIN, ':encoding(UTF-8)';
binmode STDOUT, ':encoding(UTF-8)';
}; s|^$HOME|~|g; s|/([^/])[^/]*(?=/)|/\$1|g
")
}