Hi SIMAC IT Service,
Based on the error message provided, the issue may be caused by the reason that the cloud credential you typed in is a federated user, such as user@domain.com (domain.com is a federated user).
If so, please use a standard Office 365 global administrator credential, such as admin@domain.onmicrosoft.com to run the DirSync Configuration Wizard to see if it works.
If you don’t have one, you can refer to the following articles to create a new standard Office 365 global administrator, such as admin2@domain.onmicrosoft.com.
http://office.microsoft.com/en-001/office365-suite-help/create-or-edit-users-HA103567261.aspx
http://office.microsoft.com/en-001/office365-suite-help/assigning-admin-roles-HA102816050.aspx
Thanks,
Claud