- Dow Jones FXCM Dollar Index stands at the cusp of an important move
- Japanese Yen remains a sell until this changes
- Our focus remains on our volatility-friendly Breakout2 trading strategy
The US Dollar stands at the cusp of a potentially significant rally, but whether or not it holds key short-term support may determine near-term direction.
It’s shaping up to be another volatile week for major FX pairs as traders bet on/hedge against large moves in the commodity bloc, euro, and Japanese Yen. And though 1-week volatility prices have pulled back from last week’s notable peaks, we still see scope for important changes in price.
Forex Volatility Prices Pick up on Big Week of Economic Event Risk
Data source: Bloomberg, DailyFX Calculations
Whether or not the US Dollar continues higher may be determined by whether it holds noteworthy short-term support as seen through the DJ FXCM Dollar Index.
The USD bounced sharply off of key congestion levels near 11,890 to trade towards multi-month peaks, but a more recent retracement leaves it just above previous swing highs at the 11,950 mark. Thus outlook will greatly depend on whether the Dollar is able to hold key support.
Source: TradingView, DailyFX
Our strategy outlook shifts toward our higher-volatility Breakout2 trading strategy as a number of Dollar pairs see elevated risk of outsized moves.
--- Written by David Rodriguez, Quantitative Strategist for DailyFX.com