FXStreet (Bali) - The bullish breakout above the key 81.00/50 resistance zone suggests an improved medium term setup for the broad USD picture, notes John Normand and Niall O'Connor, FX Strategists at JP Morgan.
"The technical setup for the broad USD picture has improved over the past few weeks given the extension through several key resistance levels leading to a renewed trending bias."
"Importantly, the breakout through the critical 84.50/70 resistance zone (June high/200-day MA) for the JPM USD Index suggests a higher risk that the corrective phase below the March high is now complete."
"In turn, we see potential for eventual new cycle highs above the 86.24 peak from July ’13. Moreover, the push above the key 80.90/81.14 resistance zone for the DXY is consistent with the developing bullish framework especially following the reversal from the long term range lows in May (79/78 support zone)."
"While the short term setup can allow for a pause as the next line of key resistance levels are in focus amid the current overbought setup, corrective retracements are viewed as buying opportunities."
"Support for the DXY starts in the 81.00/80.95, while the 80.35 mid-July breakout should be a max if a deeper extension is in the cards. New highs should allow for a closer test of the 82.50/82.67 resistance zone which includes the 61.8% retracement of the decline from the 2013 high (84.75 July) and the Sept ’13 peak in the coming weeks."