Where is DXY (Dollar Index) headed now?

Our favorite monthly NFP has just been released 2 hours ago, with actual figures beating both estimates and previous month’s figures.

But the strange thing is that the USD didn’t seem to move in line with the data release.
Discrepancies in the markets like a deviation from an expected norm should raise some caution among traders.

Here on the DXY Daily and H4 chart, we can see that it is currently in a textbook ‘rising wedge’ pattern:

Have a closer look at what happened during the hour of NFP release:

It should act as a telltale sign that something is not quite right with the USD.

Extreme caution should be taken when trading USD pairs, especially with the Federal Funds Rate next Thursday morning at 0200hrs Singapore Time.

My personal bias would be a downside breakout for the USD as it doesn’t seem to have sufficient bullish momentum to sustain its uptrend, not even outstanding economic data could support it.

Β 

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2 thoughts on “Where is DXY (Dollar Index) headed now?

  1. Hi, nice blog. Re USD and your above comments…I agree with you. However, I wonder if this response to NFP was just due to this data being priced in already after ADP employment change on Wednesday, and not really anything more to be concerned about? I’m not sure, but I’ll be looking to short USDJPY after the inevitable spike next week after the interest rate hike. How will you be positioning this next week? Keep up the good work on the blog!

    Liked by 1 person

    1. Hi there @Forex Millions,

      Thank you for the nice words! I’m glad you enjoyed the blog posts.

      Yes, that is a possible way of looking at it.

      On a side note, there is a distinct difference between the ADP NFP and the Friday NFP.
      ADP NFP is released by a payroll company while the NFP released on Fridays are figures generated by the Govt used by the Fed and the Govt themselves – with the latter having a higher significance, which sparked off some caution in me.

      I’m currently bearish on the JPY pairs as well, while monitoring for further cracks on the USD front.

      Thanks for stopping by!

      Liked by 1 person

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