U.S. Dollar post-NFP collapse

The Non-Farm Payrolls report gave a temporary support to USD bulls. The main factor - earnings growth, released in line with the expectations 0.3% in December. Despite the weaker-than-expected NFP, U.S. dollar kept gaining against the majority of currencies in the first half of this week. But the growth has been stopped on Wednesday and we observed not only reversal on Thursday, but a complete crash of the world reserve currency on Friday. The main fundamental reasons were: sell-off in U.S. Treasuries, Chinese threats to stop buying bonds, traders’ and investors’ skepticism about Federal reserve ability to hike three times as they penciled during last meeting. Even stronger-than-expected Core CPI (0.3% MoM and 1.8% YoY) did not help. We’ve seen an epic battle between bulls and bears for important levels and complete defeat of bulls as the result of the week.

USD Index lost 1.26% of it’s value this week and Friday’s decline was 1.03%. Frome the technical point of view, the index broke through important supports. The first one is a local support, which used to hold the intraday prices from falling further during two weeks (blue horizontal line), and the second support is the mid-term lowest daily close on September, the 8th, 2017 (green horizontal line). As the result we have lowest value of the USD Index in three years. The daily chart is illustrated below:

There is a simple technical rule: a breached support becomes resistance. So the brown downtrend line on the chart looks to be perfect to renew shorts of the greenback. Of course, if the market would give such a gift.