The US dollar has suffered some notable setbacks in recent days as equity markets continued to rally, dampening demand for the safe-haven currency. Still, technical positioning suggests the dominant bias continues to favor weakness in risky assets and a stronger greenback. The MSCI World Stock index now stands squarely at resistance marked by the top of a downward-sloping channel that has contained prices since October and showing an Inverted Hammer candlestick, hinting a the possibility of a bearish reversal in the days ahead:
Meanwhile, the US Dollar Index (an average of the greenback’s value against six top currencies) has put in a Shooting Star bullish reversal candlestick formation on a test of support at a rising trend line also dates back to October:
Barring a breakout marked by a daily close above the relevant support and resistance levels, the risk-aversion dynamic favoring lower stock markets and a stronger US Dollar remain intact.