Daily DXY Roundup - 1/05

The US Dollar Index (DXY) posted solid gains following a stronger-than expected ADP employment number. The dollar was the strongest currency on the day, outperforming a trade-weighted basket by 0.94%. The move overnight through Monday’s high at 79.527 confirmed an hourly higher low, triggering strength above Thursday’s peak at 79.771 and short-term trendline resistance. The greenback stalled gains near the 130-day moving average, failing once again to close above key resistance. However, Wednesday’s price-action has developed a very bullish outside day to suggest that another hourly higher low may be forming for a move towards the targeted 200-day moving average. Meanwhile, only below Monday’s peak of 79.527 would dampen the short-term bullish tone and re-open platform support at 78.820.

The Japanese Yen was the broad loser of the day, dropping 1.13% vs. a trade-weighted basket of currencies. Rising interest rates dragged the Japanese currency lower, which helped the USD/JPY to probe above the 61.8% retracement of the recent decline. Wednesday’s large outside day suggests a temporary buying exhaustion, considering important data (in form of the US jobs report) looms ahead. As such, dollar bulls will look for a higher low to form ahead of the 50-day moving average, roughly a 38.2% correction of the latest up-move. If further strength continues, a move above 84.51 would confirm the first substantial higher low in over 6 months. Meanwhile, Japan’s exchange-rated index (CEERJN) has tracked lower from last week’s all-time high, highlighting a false-break of the October high. Generally, when these types of failures occur, the subsequent reversals can last up to a few weeks. Friday’s non-farm payroll number will be important benchark for interest rates and the direction of the yen.

STRATEGY UPDATE:
BUY USD/JPY at 82.72, targeting 84.51 1st, risking 82.17
BUY CAD/JPY at 82.85, targeting 84.55 1st, risking 82.30
SELL EUR/USD at 1.3250, targeting 1.3080 1st, risking 1.3305