The US Dollar Index (DXY) maintained support at the 38.2% retracement for the third straight day. This bullish development along with the sell-off in commodities should redirect dollar bulls back above the key 80 handle. The dramatic rise in treasury yields should also narrow yield differentials in favor of the US. This would also set the table for further gains through the pyschological 80 level towards 80.25/80.53. Clearing this would greatly increase the prospects for a move to the important 81.85/82.00 area. Meanwhile, only a loss of 79.22 (the 38.2% retracement) alters the bullish scenario.
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The EUR/USD failed to overcome 20-day moving average resistance once again. The pair retreated late in the North American session to retest the key 38.2% retracement (of recent gains). Losing 1.3260 immediately shifts focus to the 1.3150/1.3210 region, while only a clean break above the 20-day moving average offers relief.
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The USD/JPY has benefited from a rising yield environment. The pair tested 50-day moving average support before retracing 61.8% of recent losses. Dollar bulls should anticipate a retest of the 110-day moving average above the 84 handle. Clearing this key resistance immediately exposes the 84.88/85.00 region.
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STRATEGY BUY USD/JPY at 83.40, targeting 84.88, stop at 82.85
..............SELL EUR/USD at 1.3286, targeting 1.3150, stop at 1.3341
