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Currency Market: US Dollar Index Continues to Trend Higher


The US Dollar Index is on the verge of an upside breakout near the 80 level.

The US Dollar Index (UUP) had a nice big up move yesterday, and is now challenging the early October high around 80. I still really like the risk reward of US Dollar Index long positions here, and fellow Minyanville contributor Jeff Cooper also highlighted the bullish setup in his Morning Report (subscription required). A breakout above the 80 level would really kick this uptrend into higher gear, and hopefully as a regular reader, you should know that I think the US Dollar Index could easily move into the high 80s. See the weekly chart of the US Dollar Index below.

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The commodity currencies have rolled back over, with the AUDUSD breaking the 1.01 level I wrote about last week right now as I am typing. The USD strength is really gaining steam, and these commodity currencies have outperformed, so they are now some of the last to roll over. I would like to highlight the Canadian Dollar (FXC) as a nice risk reward short at these levels just above 0.97. It is rolling back over below the shorter term moving averages, and is also about to give a MACD sell signal. I think the Canadian dollar call fall into the low 0.90s pretty easily here. See the short term setup below.

Click to enlarge

The Japanese Yen (FXY) is another one of the last currencies to roll over against the US dollar. The brief pullback below the 77.50 level held in the USDJPY cross, so it looks like this yen weakness could continue. The next target I am looking for in the USDJPY cross will be the 200 day moving average just above 79. I will trade to the long side here, and will probably try and sell partial positions above 79. See the US dollar starting an uptrend against the Japanese yen below.

Click to enlarge

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