The financial markets have been discombobulated with news of changes to the USD Index, which technically looks set up for a major bull move. Recent data suggests that the Index has invalidated its move back below this critical 61.8% Fibonacci retracement level. This change happens as the monthly turning point has moved in, as illustrated by the vertical dashed lines on the market’s charts. The Australian Dollar is coming under extreme repeated selling pressure against the US Dollar. That trend was most pronounced during the Thursday session primarily dominated by Asian trade.
Traders are eagerly watching to see which direction the USD Index breaks. They could point to the current rally, which has launched from a low of $1,045.40 set in 2015. That upward trend was capped in the summer of 2020 with a peak of $2,078 in mid-July. The ratio we get from just these two points, $2,078 over $1,045.40, comes to almost 1.988. This counter-intuitive mathematical relationship has huge implications for future price targets.
Analysts have taken this ratio and raised it to the power of 1.618, resulting in an estimated value of 3.03. When you take this figure and multiply it by the 2015 market low of $1,045.40, you arrive at a target price. This is equal to about $3,167.56. Market calculators have rounded the target price to a nice, neat $3167. This would serve as a major resistance level that traders will watch closely.
In sharp relief, the often-followed Australian Dollar has found it exceedingly difficult to cling to its gains against the US Dollar. As things stand now, it is facing significant bearish pressure underneath the 0.6300 level. The Australian Dollar has been one of the biggest victims highlighted by an anomalous collapse in recent trading days. That trend was magnified at Thursday’s Asian market open hours. Traders have been looking closely as the currency has continued to languish below this important rebound point.
The broader S&P 500 Index paints an equally sobering picture of a more risk-averse market environment. It has pulled back to the 50% Fibonacci retracement level, which could be a key support or resistance target. Technical analysis suggests that the S&P 500 Index does not necessarily need to experience upward movement before it could potentially fall to new lows. Just the fear of more drops is enough to contribute to the climate of fear that has investors on edge.
Furthermore, the trading system used has opened short positions on stocks almost immediately after their peak in February. This strategic consolidation is representative of the broader bearish sentiment that has permeated the crypto market as traders prepare for an expected volatility storm.