The Dow Jones FXCM Dollar Index (ticker: USDollar) has been a major beneficiary of Japan’s Ministry of Finance intervening in currency markets to weaken the yen and the Bank of Japan easing monetary policy further by increasing their asset purchase plan. As one of the yen’s most heavily traded currency partners the US dollar shot higher as the yen crumbled amid massive currency yen selling by the MoF. As the index climbed other partners fell in line with the unprecedented US dollar burst which has placed the buck as the best performing currency intraday.
The burst higher this morning for the index has all but confirmed the bullish outside week as it lifted the index well clear of last weeks highs. It has also gone some way to confirming the double bottom that we forecast earlier in the week as forming. We have identified a very similar pattern playing out in late April and early May as the index bottomed out, posted a bullish outside week and then continued to climb into the following week. As such, we have a constructive outlook for the buck going into the last few days of trade and early next week.
Written by Jonathan Granby, DailyFX Research Team
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