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Forex: US Dollar Index forming possible 'bull flag' pattern on weekly chart

FXstreet.com (Barcelona) - The US Dollar Index finished the day sharply higher, closing up 0.96% at 82.75. Economic data was fairly quiet but US Jobless Claims did beat expectations, coming in at 323k vs. 335k forecast. The real catalyst behind the powerful move in the greenback seemed from the USD/JPY, which finally took out the key 100.00 level and closed at 100.60.

According to Mike Jones, Currency Strategist at BNZ, “The USD has roared higher in overnight trade, driven by an almost two figure surge in USD/JPY. This despite a distinct lack of action in other markets, and a dearth of economic data. The narrow DXY index has climbed almost 0.8% to 82.60.”

From a technical perspective, the pair appears to be forming a possible ‘bull flag’ continuation pattern on the weekly chart. In order to be confirmed, the DXY would need a weekly close above the 83.10 level (upper boundary resistance). Note this pattern has been forming for a decent amount of time (mid March), and has a measured move target up near the 86.10 level. However, it must be noted the ADX (7) is sloping sharply downward with a value of 23.56 indicating a lack of trend is still present. This could keep conditions choppy until more momentum can be gathered.

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The break above 100.00 in USD/JPY finally come in a dull trading Thursday, and with markets caught off guard. Over the European session, volume was thinner than usual, although first signs of a dollar advanced appeared, as US yields gained even more ground today after past Friday made their biggest one-day jump since January on better than expected US NFP data.
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