It’s rare when a target is reached so perfectly as it’s the case in the USDX right now.
In yesterday’s analysis, I provided a lot of contexts for the current prices moves. Today, I’ll focus on the short-term price moves and I’ll start with the market where we saw the clearest, immediate-term indication: the USD Index.
The Fibonacci retracement levels provide important support, and when a market reaches one of them, it’s likely to turn around. Moving below one of them makes a move to the next level quite likely (or to the other nearby support in case of declines). If the market reverses after reaching the 38.2% retracement, a rally is considered very strong, and if it reverses only after the price reaches the 61.8% retracement, a rally is considered normal.
Until the market moves to the first (38.2%) retracement, the rally is considered to remain intact – only a confirmed breakdown below the 61.8% Fibonacci retracement means that “hey, something might really be changing with regard to this trend”.
The USDX just reached its 38.2% Fibonacci retracement and it rallied backup. So far, the move was just tiny, but it’s very likely that the bottom here is in.
Why? Because the above-mentioned retracement is not the only particularly important support level that’s currently in play. The U.S. dollar index additionally reached its rising support line that’s based on the 2023 and March 2024 lows. That’s the clearest and most important (as the bottoms creating it are important) medium-term support line that we have on the USDX chart, so it’s no wonder that it provides strong support.
And seeing both of those support levels being reached at the same time makes it very likely that the bottom is indeed in. Especially, that it comes on top of all the reasons due to which the USD Index is likely to move higher that I described yesterday.
Yesterday’s decline in the USD Index triggered a rally in gold – and it even managed to move above its 61.8% Fibonacci retracement, but…
It didn’t move far above it, and just like it was the case in 2008, it might be invalidated very soon. Any I mean exactly that – as the USDX appears to have bottomed and it’s rallying back up, gold might invalidate the move above its 61.8% Fibonacci retracement any hour now.
This creates a great trading opportunity for those who are prepared.
And if you thought that there were multiple signals on many markets, here’s another screaming signal for the stock market (and other markets as they are related).
Remember the meme stocks? Gamestop bubble that attracted investment public and ended in a blow-off top?
We’re seeing the same thing right now. Ok, the volume is lower as fewer people are interested, but the sudden jump in prices and RSI above 90 make the analogy clear.
It’s the investment public that’s most likely buying – that’s the topping sign.
Miners declined after that top, and… Do you remember what else formed a massive, volatile top at that time when everyone and their brother expected it to shoot for the moon? Silver.
The pattern that we see in it remains clear (even the volume readings confirm what I wrote yesterday), and I’ll get back to it in my following analyses (perhaps even later today), but the key thing is this: the markets are all confirming the same picture – the AI-craze led super-optimism is at its extreme, and this is exactly when and how tops are formed (and bottoms for the U.S. dollar). And we have multiple technical indications confirming that. Interesting times, and profitable ones too, even though it might not be apparent right now. Remember: patience is virtue and it’s darkest before the dawn.
It seems that the major tide is here in the case of currencies (USD/YEN!), stocks (tech stocks, broad market), bitcoin, and precious metals. It also seems that junior mining stocks provide an excellent opportunity right now, and I invite you to subscribe and read all key details in my premium Gold Trading Alert (along with trading details). Subscribe today.
Thank you.
Przemyslaw K. Radomski, CFA
Founder, Editor-in-chief