U.S. Dollar Index is the key parameter based on which the risk appetite in the near and intermediate term from now onwards should depend. If the Dollar is strong, market will reduce the risk appetite. A strengthening Dollar might create a pullback and a possible correction in the near future. On the other hand a weakening Dollar will lead to an extended rally in equities and commodities in the coming weeks.
A close look at the U.S. Dollar Index tells that on 10th February, 2012, for the first time in several weeks it held higher prices going into a daily close. The U.S. Dollar Index appears to have stamped out a daily swing low on the daily charts. The Stochastics oscillator has given a bullish crossover on daily charts. Is this pointing a sort of reversal in the risk appetite? Well a closer look is necessary.
The Fibonacci retracement of 23.6% of the move from May, 2011 lows i.e. 72.9 to the highs of January, 2012 i.e. 82.1 along with the 100DMA which is getting merged at this level should act as a stiff resistance for the continuation of the strong risk appetite in the global markets. The stiff resistance in this case is 79.9-80. But any break above it should open the flood gates towards 80.9 which is the 50% retracement of the move from the highs of June, 2010 highs i.e. 88.9 to the lows of May, 2011 and a likely test towards 82.1.
Now it’s your turn…..
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