The stock market has experienced a sharp reversal, with the S&P 500 falling back to 4150, indicating that the expected breakout point of 4200 was overcrowded. Currently, the U.S. dollar is still in a bullish mode, and it could extend its gains if the stock market remains in risk-off mode.
In Elliott wave terms, we had previously discussed the Kiwi falling back, which is no surprise as expected. This move was also supported from a macro perspective since we were looking at speculators to sell into the Reserve Bank of New Zealand (RBNZ), as there was “no surprise” on the schedule. While RBNZ hiked, the market expects that it is approaching the end of the cycle, so the New Zealand dollar (NZD) is coming down significantly. The pair is expected to continue falling into a third leg of an impulsive sell-off, indicating more weakness after any short-term rally up into subwave four, while the U.S. dollar index is headed to 105 and 107.
S&P 500– broke higher but failed, currently at the lows.