Dollar Index inches closer towards major resistance:Mecklai

From the below chart, it may be observed that the DXY is in a clear uptrend ever since bottoming out at 72.95 levels in May 2011. The DXY recently extended its advance to multi-month highs of 82.40 levels as demand for the US currency accelerated on the back of intensifying risk aversion across the board.

The index is currently seen inching closer towards the key technical resistance of 82.50 levels (61.8% retracement of 88.40 to 72.95). Should the index manage to stabilize below the same, it would open door for a move towards 84.75 levels (76.4% retracement of the same move). This in turn could trigger aggressive selloff in other asset classes such as equities, commodities, and other currencies.

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However, with short-term technical indicators pointing out at overbought conditions, strong resistance is expected at 82.50 which if manages to hold, modest correction can be expected first for a possible move towards 81.00.

The below chart shows movements in Dollar Index (DXY) since the past 3-years

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