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Uncertainty looms over major currencies

Author: Siddhesh Ghare/Wednesday, August 22, 2018/Categories: Currency

Uncertainty looms over major currencies

Given the current political and economic developments across the globe, it is difficult to be certain that a given currency will have a uni-directional movement for a long period.

Rather, it would be safe to say that a given currency would be witnessing high volatility and vigorous fluctuations resulting into numerous huge swings in a given period of time. The majors are more bound to behave in such manner now.

The Dollar Index (DXY) that measures the greenback against a trade-weighted basket of six major currencies is the most vulnerable in today's scenario. The technical charts of the DXY show that it might zoom ahead of market expectations. In fact, market participants could be worried of the impact of the dollar trend on all the majors, commodity currencies and the second world currencies.

The weekly charts of the DXY clearly indicate that the index formed a strong bottom in the first quarter of the calendar year 2018 near the 50 per cent Fibonacci retracement level of 87.50 and since the beginning of the second quarter has been continuously strengthening, now to breach 96, the 23.6 per cent Fibonacci resistance level, only to move further up towards 100 & 103.

The index has been continuously maintaining itself well above the 8-13-20 moving averages and also their bullish crossover. The RSI-Bollinger combination also suggests that there is much of an upside that could be seen in the index which, moreover, would be uni-directional without any major corrections henceforth. The index has already penetrated the bearish ichimoku cloud and a fresh bullish cloud formation is brewing which again validates a sustained northward movement in the index. A recent inverted head and shoulders pattern formation could also be seen at the neckline, which stands at 95 and holds a target up to 100.

The technicals, in most cases; have helped the world be well informed of major changes that occur in future. Hope they prove themselves worthy enough this time too.

The author is the head of FX Risk Solutions, Karvy Forex & Currencies Pvt Ltd

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