After Positive Jobs Data, Expect More Dollar Strength

Includes: FXF, UDN, UUP
by: Vincent Fernando, CFA

US Dollar/Swiss Franc is currently near 1.0160, after a major rally in the USD. This was fueled by the significantly better than expected Non Farm Payrolls (NFP) number of -11K compared to last month's -190K, reported last week.

Ahead of the report, the USD/CHF was essentially flat, hovering tightly near parity in anticipation, allowing volatility to shrink to the lowest levels since July 23, 2009, as marked by the extreme narrowness of the green Bollinger Bands, see the 4 hour chart below.

This indicated the potential for a large and sudden move, it was the quiet before the storm if you will.

Now, going forward, the U.S. dollar looks poised to trend higher in the near term and achieve still higher highs against the franc.

There are a lot of positive momentum indicators to argue for this. Below, note the strong break above the upper Bollinger Band, the accelerated cross of MACD above the zero line, and the increased amplitude of MACD, MACD Histogram, and CCI correlated with a newer significant high, as indicated by the white upward-slanting dotted lines.

Click to enlarge

Also, on the daily chart, a major downward trending upper channel line has been breached.

However, on the more dollar-bearish side, the nearest daily horizontal resistance at 1.0175 and 1.0275 along with the daily upper Bollinger Band still remain intact, in opposition to the developing up trend on the 4 hour chart. Thus dollar strength might only be short term.

Nevertheless, increased strength of USD vs. CHF was anticipated a couple days before NFP in this article and is still anticipated to continue further.