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US Dollar Price Outlook: US Dollar Rally Driving USD/JPY to Fresh Multi-Month Highs

US Dollar Price Outlook: US Dollar Rally Driving USD/JPY to Fresh Multi-Month Highs

Nick Cawley, Senior Strategist

US Dollar Price, News and Analysis:

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The US dollar continues its relentless march higher and is back at levels last seen in November last year. The greenback is being underpinned by rising US Treasury yields and a defensive move back into the USD as the spread of a third covid-19 wave continues to accelerate. The US vaccination program is not only on track but President Biden yesterday doubled his original target of covid-19 vaccinations to 200 million doses in his first 100 days in office, an ambitious target but one the President believes can be reached.

The US dollar basket technical set-up remains positive, especially after the DXY convincingly broke above the 200-day simple moving average for the first time since late-May last year. The 20-day sma is now crossing above the 200-day sma, a further bullish set-up, while there is little in the way of resistance until a pair of swing-highs between 94.31 and 94.80. While this looks the likely landing-zone for the greenback, the CCI indicator suggests that the market is overbought and may need to equalize before this target comes into view.

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US Dollar Basket (DXY) Daily Price Chart (June 2020 – March 26, 2021)

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USD/JPY is hitting a fresh 9-month and nearing the 110-handle as buyers continue to dominate the market in the last three days. A short-term series of lower highs and lower lows were decisively broken mid-week with the pair now back at levels last seen in June 2020. This high is unlikely to stop the pair moving higher and back to the March high of 111.716 before an attempt at the February high at 112.229. The pair look overbought (using the CCI) and, like the US dollar basket, may need a little time to unwind this before making the next move higher.

USD/JPY Daily Price Chart (February 2020 – March 26, 2021)

USD/JPY Bullish
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of clients are net long. of clients are net short.
Change in Longs Shorts OI
Daily -3% 7% 3%
Weekly -20% 23% 1%
What does it mean for price action?
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Retail trader data shows 42.92% of traders are net-long with the ratio of traders short to long at 1.33 to 1. We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests USD/JPY prices may continue to rise.Positioning is more net-short than yesterday but less net-short from last week. The combination of current sentiment and recent changes gives us a further mixed USD/JPY trading bias.

What is your view on the US Dollar– bullish or bearish?? You can let us know via the form at the end of this piece or you can contact the author via Twitter @nickcawley1.

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.