The dollar index extends a boost from last Friday and hit a one-week high early Monday, lifted by renewed risk aversion.
Traders are scrambling for safety amid a fresh surge in new Covid cases in China, which has led to tighter restrictions, with the capital Beijing’s most populous districts hardest hit.
China’s zero-covid-tolerance policy increases the volatility in such a situation, as severe restrictions affect economic activity and markets await signals on whether the government will soon begin to ease its policy.
Fresh safe-haven buying lifted the dollar index, signaling a fresh direction after the price was in sideways mode last week, consolidating a recent sharp fall.
Initial reversal signals are developing on daily chart, as fresh gains have cracked the first pivot at 107.41 (Fibo 23.6% from 114.72/105.15 drop, reinforced by 10DMA), with a sustained break here for a firm short-term structure and exposing next major barriers at 108.81/ 109. (Fibo 38.2% / 100DMA).
Northern-type daily indicators support the action, although momentum is still deep in the negative territory, but a weekly bear trap below Fibo 61.8% of 101.29/114.72) supports the action.
Recovery needs to rise through 109 zone and violation of base of thick daily cloud (109.61) to confirm reversal signal and open way for further recovery.
Otherwise, a recovery will remain fragile and a risky stop, which would signal better opportunities to re-enter a larger downtrend from the September 29 peak (114.72).
Res: 108.30; 108.81; 109.05; 109.61.
Sup: 107.90; 106.68; 105.70; 105.15.