Why the Dollar is Today's Currency Darling

A sign advertising jobs is posted in the window of a Jack in the Box restaurant.
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A sign advertising jobs is posted in the window of a Jack in the Box restaurant.

When Friday's nonfarm payroll report handily beat expectations, the dollar got a major lift on the payroll report - contrary to its longtime pattern of trading as a safe haven from bad news.

Has the dollar won the so-called currency war?

"Certainly we've won the global currency battle for now," says Brian Kelly of Shelter Harbor Capital. The stronger dollar, he says, "is actually a good thing because money's flowing into the U.S." As for the dollar's pattern of moving in the opposite direction from stocks, "that old correlation seems to have broken, and it's a good thing."

"The U.S. economy right now is the best of a bad bunch," says Amelia Bourdeau, director of foreign exchange at Westpac Institutional Bank. The dollar has been rallying of late because of a flight to quality in the wake of the Italian election and downbeat euro zone economic reports, she told CNBC's Amanda Drury. "However, today it was certainly about the jobs report."

(View more: CNBC: Italy Elections a Setback for Confidence in Europe)

Andrew Busch, publisher of andrewbusch.com, goes a step further, arguing that Friday's report pointed to a "dichotomy out there between the United States and Europe."

So how should you trade the dollar-euro pair now?

Busch is hesitant to sell the euro too aggressively. "We're getting to some levels in the euro where there is going to be support," he says. Also, the jobs report is just one piece of data from before the March 1 sequestration.

But Busch says that markets will continue responding to the strong report, so he does want to sell the euro against the dollar. He cautions that with the euro close to its 200-day moving average, tight stop is key. So he recommends entering the trade at 1.3050, setting a stop at 1.3100 with a target of 1.2850, and adds, "I'm willing to resell if we move down through the 200-day moving average."

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