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Business confidence in Australia increased from 1 to 3, according to a report by National Australia Bank

Australia’s National Australia Bank reported that the business confidence index rose from 1 to 3 in December, showing an improvement in business sentiment compared to the previous month. The article also covers forecasts and analysis regarding commodities and currency pairs, including insights into EUR/USD and GBP/USD movements.

Trends Affecting Commodity Markets

There’s a discussion about trends impacting gold, silver, and cryptocurrencies. The article emphasizes the importance of staying updated on economic trends for better trading decisions. In December 2025, we saw a small rise in Australian business confidence, which was a slight positive sign. However, the recent Q4 inflation report released last week is more crucial. It showed the Consumer Price Index (CPI) cooling to 3.1%, slightly below what was predicted. This may change the outlook for the Reserve Bank of Australia (RBA) as we approach February. Reduced inflation lowers the chances of an RBA rate hike in the near future, a scenario that had been expected at the end of last year. As a result, we are considering option strategies that could profit from a potential decline or stable movement of the Australian dollar against the US dollar. For example, selling AUD/USD call options with a strike price around 0.6800 could take advantage of limited upside.

Australian Labor Market and Inflation

We also need to look at the December jobs report released two weeks ago, which revealed the unemployment rate steady at 3.9%, exceeding expectations. This contrast between a strong job market and softening inflation creates uncertainty, leading to increased implied volatility on AUD currency pairs. In this situation, buying straddles on AUD/USD could be a smart move ahead of the next RBA meeting, allowing us to profit from significant price changes in either direction. For traders focused on equity indices, the reduced likelihood of a rate hike is favorable for the ASX 200. Recall how the index faced challenges during the rate hike cycle in 2024; this shift in monetary policy expectations might lead to further gains. Therefore, buying call options on ASX 200 futures or selling out-of-the-money puts presents a bullish strategy with limited risk. On a global scale, ongoing signals of a policy change from the U.S. Federal Reserve are applying broad pressure on the US dollar. Typically, a weaker dollar boosts commodity prices, as we observed with gold’s rise throughout 2023. This macro trend supports long positions in silver futures or options, benefitting from a declining dollar and continued industrial demand. Create your live VT Markets account and start trading now.

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Japan’s corporate service price index decreases from 2.7% to 2.6% year on year

The Japan Corporate Service Price Index dropped slightly from 2.7% to 2.6% in December. This small change shows that prices for corporate services in Japan are relatively stable. Gold prices are close to record highs. The weak US Dollar and a preference for safe investments are driving interest in gold. The price is nearing $5,100, continuing a positive trend for the seventh day in a row.

Currency Market Overview

The EUR/USD rate is around 1.1870, showing losses even in a bullish market. In contrast, the GBP/USD pair is gaining momentum, reaching 1.3685, its highest level since September 2025, thanks to strong UK economic data. Hyperliquid’s decentralized exchange, HIP-3, reported that open interest rose to $790 million, a 200% increase in just one month. While this is impressive, it’s only part of Hyperliquid’s total open interest of $8 billion. Tether Gold dominates the tokenized gold market, holding 60% of the sector. Its value exceeded $2.2 billion in 2025 as interest in tokenized assets grew alongside rising gold prices.

Gold Market Dynamics

Gold prices have surged past $5,100 an ounce, primarily due to a weak US Dollar and a move to safer assets. This trend has been fueled by significant gold purchases by central banks, which accelerated in 2024 and continued into 2025. Last year, global gold reserves increased by over 800 tonnes. Traders may want to consider call options on gold miners or ETFs to benefit from this trend, but they should also be cautious due to potential volatility ahead of the Fed’s decisions. The weakness of the US Dollar remains crucial, as it struggles to recover from its lows in September 2025. Ongoing uncertainties in trade policy have led the Dollar Index (DXY) to drop below the important 95.00 support level, a stark contrast to the 104.00 range seen in much of 2024. This situation favors shorts on the dollar against currencies backed by stricter central banks. There’s a clear divergence in European currencies, creating opportunities in pairs like EUR/GBP. The British Pound is gaining strength above 1.3650 against the dollar, supported by strong domestic data that pushes back the timeline for Bank of England rate cuts. This reflects the ongoing battle with inflation from 2024. Meanwhile, the Euro seems capped under 1.1900, suggesting that traders might want to use options to bet on the Pound outperforming the Euro soon. In Japan, the small decrease in the Corporate Service Price Index to 2.6% will likely keep the Bank of Japan cautious. This continues the trend of yen weakness, which has been evident since their hesitant policy changes in 2024. Thus, using the yen as a funding currency for carry trades with higher-yielding currencies remains a good strategy. The impressive 200% rise in open interest on decentralized platforms shows a strong appetite for leveraged bets. Although the CBOE Volatility Index (VIX) has risen to about 22, it is still far from the panic levels seen in past crises, which encourages this speculative behavior. This suggests that implied volatility may be low for some niche assets, offering opportunities for those selling option premiums. Create your live VT Markets account and start trading now.

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UK’s BRC Shop Price Index exceeded predictions in January, reaching 1.5% instead of 0.7%

In January, the British Retail Consortium’s Shop Price Index rose by 1.5% compared to the previous year, exceeding the expected 0.7%. This increase signals a higher than anticipated retail inflation rate. During Tuesday’s Asian session, the EUR/USD pair is trading around 1.1870 after gaining over three days. While the overall trend is positive, the pair still shows losses below 1.1900.

Gold Prices And The Federal Reserve Meeting

Gold prices remain close to record highs due to safe-haven demand and a weak USD as we approach the Federal Reserve meeting. Recent data shows that gold has attracted buyers for seven consecutive days. Hyperliquid’s decentralized exchanges have enjoyed strong growth, with open interest reaching $790 million—more than double its amount from the past month. Tether Gold (XAU₮) dominates the Gold-backed stablecoin market, accounting for 60% of the total market supply. This growth reflects increased demand for tokenized assets as gold prices rise. FXStreet advises readers to research thoroughly before investing, as there are risks and unpredictable market conditions. The information shared is for informative purposes only and not meant as trading advice.

UK BRC Shop Price Inflation

The UK BRC shop price index for January shows a rise of 1.5%, more than double the expected 0.7%. This indicates that inflation is proving stickier than earlier estimates. Official data from late 2025 revealed that the Consumer Price Index remains above the Bank of England’s 2% target. This persistent inflation complicates the Bank of England’s ability to consider interest rate cuts soon. Following the morning’s data, interest rate swap markets now suggest less than a 40% chance of a rate cut before the third quarter of 2026. This marks a significant change from just a month ago, when a cut by June was nearly guaranteed. For traders, this strengthens the argument for a bullish outlook on the Pound Sterling. Strategies that could benefit from a rising GBP/USD, such as buying call options that expire after the next central bank meeting, should be considered to capture potential gains. This approach is backed by recent data showing a steady increase in net-long positions on the Pound for three weeks in a row. Meanwhile, we need to keep an eye on Gold, which continues trading near its all-time highs of over $5,100. The trend is mainly driven by weakness in the US Dollar and market concerns over trade policy—a situation reminiscent of the 2018-2019 period. Global gold-backed ETF inflows have also risen sharply this month, indicating that investors are seeking safe havens. Although the high price means that outright long positions in Gold carry significant risk, the upward trend is clear. A strategy involving buying call spreads on Gold futures could allow continued participation in the rally while defining risk. The strong interest in tokenized gold throughout 2025 highlights a growing desire for assets outside traditional banking systems and away from the US Dollar. Create your live VT Markets account and start trading now.

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In January, consumer confidence in Ireland increased to 64.7, up from 61.2.

Ireland’s consumer confidence rose to 64.7 in January, up from 61.2. This change reflects a shift in how consumers feel as the new year begins. Gold prices are gaining strength, staying around $5,050 due to uncertainties in finance and global politics. Reports on job statistics and consumer confidence from the US are due soon, and these may affect market trends.

Surge In Hyperliquid’s Decentralized Exchanges

Hyperliquid’s decentralized exchanges have experienced a significant increase, reaching $790 million in open interest. This is more than a 200% growth in just one month, yet it’s still a part of the platform’s total market interest of $8 billion. Tether Gold makes up 60% of the market for tokenized gold, valued at over $2.2 billion. The demand for tokenized real-world assets has risen alongside the increase in gold prices. FXStreet recommends a cautious trading approach due to market volatility and the risks involved with financial investments. They stress the importance of thorough research and highlight the potential for significant losses in open markets.

Impact Of Economic Indicators On Currency Trends

The increase in Irish consumer confidence to 64.7 is a positive sign for the European economy. This data supports the Euro’s recent strength, especially with the Eurozone PMI data stabilizing at 50.8, which is just above the level indicating growth. Traders might consider call options on European indices, expecting a gradual recovery. With the weak US dollar, the EUR/USD moving above 1.1900 is an important trend to follow. The upcoming Federal Reserve meeting this Wednesday is critical for any signals on monetary policy. If the Fed maintains a dovish stance, it may push the pair higher, making short-term Euro call options a smart strategy. The pound is also strengthening, with GBP/USD approaching 1.3700. This is partly due to recent UK inflation data, showing core inflation above the Bank of England’s target at 2.6% last month. This ongoing price pressure makes rate cuts less likely and boosts the pound against a weak dollar. Gold’s rise towards $5,050 underscores significant market anxiety surrounding geopolitical risks and uncertainties from central banks. We saw early signs of this in 2025 when demand for tokenized gold surged and physical purchasing increased. Traders can consider long-dated call options to keep exposure to gold’s safe-haven qualities while limiting potential losses. In summary, the mix of geopolitical tension and upcoming central bank decisions creates a volatile environment. This scenario makes options strategies particularly valuable for managing risk. Traders should think about using volatility indexes to protect their portfolios from sudden market shocks in the weeks ahead. Create your live VT Markets account and start trading now.

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As market uncertainty continues, GBP/USD nears 1.37, facing its first test since September.

The GBP/USD currency pair has moved up slightly, hitting 1.3700. Market sentiment is mostly unfavorable toward the US Dollar, which helps the GBP. Investors are closely watching upcoming decisions from the Federal Reserve about interest rates. Currently, the market expects two small interest rate cuts by the end of the year. This contrasts with the Fed’s own predictions, which suggest one cut each year for the next two years.

The Pound Sterling

The Pound Sterling is the oldest currency in the world and is issued by the Bank of England. It ranks as the fourth most traded currency, representing 12% of global transactions, with an average volume of $630 billion a day. The Bank of England’s monetary policies significantly affect the Pound’s value. Economic stability and trade balance data influence its strength; stronger economic performance typically boosts the Pound. A positive Trade Balance increases demand for a country’s currency among foreign buyers. This content was partly written by Joshua Gibson, an Economics and Finance major experienced in trading. Please note that investing carries risks, and individuals should review information thoroughly before making financial decisions. GBP/USD is pushing toward the 1.37 mark, continuing the trend from late last year due to a weaker dollar. Recent data show UK inflation is steady at 4.0%, which is notably higher than the US rate of 3.4% from December 2025. This difference puts pressure on the Bank of England to keep rates higher for a longer period compared to the Fed. The market has a strong expectation for a dovish shift from the Federal Reserve, with fed funds futures indicating over a 70% chance of a rate cut by the June 2026 meeting. This outlook is a main reason for the dollar’s weakness. The uncertainty around who will be the next Fed Chair adds to this situation, as a new chair is likely to promote a more relaxed monetary policy.

Current Market Sentiment

In contrast to the Fed’s more relaxed outlook, the Bank of England is dealing with ongoing domestic price pressures. Last quarter’s wage growth data showed an annual increase of over 6%, keeping services inflation high. This difference in policy between the two central banks is a key factor driving the Pound’s strength in the medium term. While the pair shows overbought signals on technical charts, taking a long position carries the risk of a quick pullback. A smarter approach would be to use call options to take advantage of potential gains toward the psychological level of 1.40. Buying call options lets us limit our downside risk to the cost of the option while still being part of the strong upward trend. We should stay cautious, as the current market sentiment relies heavily on expectations of US policy changes and easing trade tensions. A surprise move from the Fed or new tariffs could quickly change the landscape. This might cause the dollar to strengthen and push GBP/USD back toward the 1.3400 support level seen in late 2025. Create your live VT Markets account and start trading now.

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Japanese Yen strengthens amid intervention speculation, causing USD/JPY to drop near 154.20

The USD/JPY dropped to around 154.20 in the early Asian session, marking its lowest level since November 2025. This decline reflects speculation about possible intervention. The Japanese Yen received some temporary support from discussions about potential actions by Japanese and US authorities. However, worries about Japan’s rising government spending may limit budget gains. On Friday, speculation increased after reports revealed that the Federal Reserve Bank of New York had talked with financial institutions regarding the Yen’s exchange rate. Japan is preparing for an election on February 8, raising concerns that recent policies might affect the country’s debt and, in turn, the Yen’s value.

Value of the Japanese Yen

The value of the Japanese Yen, a major global currency, depends on Japan’s economy, the policies of the Bank of Japan, and differences in bond yields. The Bank of Japan plays a key role in managing the currency, but interventions can be politically sensitive. Historically, differences between Japanese and US bond yields have favored the US Dollar over the Yen. Recently, this gap has narrowed due to Japan’s policy changes and global rate cuts. The Yen tends to attract investors during market instability, viewed as a safe-haven currency, which can raise its value compared to riskier currencies. As the USD/JPY falls below 154.50, implied volatility has surged, reaching levels not seen since late 2025. Currency volatility indexes have risen over 15% in the past week, indicating the market is bracing for significant moves leading up to the February 8 election. This unpredictable environment makes buying option straddles a smart strategy to capitalize on potential price swings, regardless of their direction. The risk of intervention from Japanese authorities is real. They previously spent over ¥9 trillion to support the Yen in a similar situation in late 2025. A sudden move could easily push the USD/JPY down by 3-5 yen in one session, making plain long positions risky. Traders considering intervention should buy put options, as these can profit from a drop while limiting risk to the premium paid.

Fundamental Picture

However, the overall situation suggests that any Yen strength due to intervention will be short-lived. Japan’s government debt, which is over 260% of its GDP, poses a long-term concern for the currency. Increased fiscal spending promises tied to the upcoming election will only heighten these pressures on the Yen. This fundamental weakness is compounded by the significant interest rate gap between the US and Japan, which exceeds 300 basis points. We believe this yield difference will continue to draw capital to the Dollar, limiting the Yen’s strength. A prudent strategy would be to take advantage of any intervention-driven drops towards the 150.00 level by purchasing longer-dated USD/JPY call options, preparing for a potential rebound. Create your live VT Markets account and start trading now.

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The Dollar weakens due to geopolitical concerns as the Euro rises to nearly 1.1870

The Euro is gaining strength as the EUR/USD approaches 1.1870, while the Dollar is weakening due to geopolitical worries and potential currency intervention by the US and Japan. Currently, the EUR/USD is at 1.1872, rising from a low of 1.1835 with a gain of 0.39%. Trade tensions between the US and Canada are increasing, even as tariff threats on Europe have decreased. The upcoming Federal Reserve meeting is crucial, with many expecting rates to stay the same. Investors are keen to hear insights during Chair Jerome Powell’s press conference.

Current Economic Indicators

The US Dollar Index has fallen by 0.41% to 97.05, while the German Ifo Business Climate Index remains unchanged. This month, the Euro has shown strength against major currencies, especially against the Canadian Dollar, which has dropped 3.44%. Concerns about intervention from Japan and the US are affecting the Dollar. US Durable Goods Orders rose by 5.3% in November, exceeding expectations. Traders expect a 44 basis point reduction from the Federal Reserve, while German business confidence has not changed since January. Technically, the EUR/USD appears to be on an upward trend and may test 1.1918 or 1.2000 if it breaks through 1.1907. However, a fall below 1.1800 could lead to a test of 1.1728. The trend shifted from sideways to upward after surpassing the December 24 high of 1.1807. A year ago, the Euro was climbing toward 1.1870 as the Dollar weakened amid geopolitical tensions and rumors of currency intervention. However, that bullish period was short-lived as market conditions have changed significantly since early 2025. Now, with the EUR/USD around 1.1150, we need to adjust our strategies.

Strategic Market Positioning

The US Dollar Index, which struggled below 97.05 last year, has made a strong recovery and now trades above 101. Expectations for 44 basis points of Federal Reserve easing by the end of January 2025 did not happen. The Fed remained cautious as core US inflation hovered around 2.8% for the latter half of 2025. On the Euro side, the sluggish German economy, suggested by flat Ifo data last year, continues to be a concern. Recent Eurostat figures indicate that Eurozone inflation dropped to 1.9% in December 2025, increasing pressure on the European Central Bank (ECB) to adopt a softer policy. This growing difference in central bank policies is critical to consider. Given this situation, we recommend using options strategies that can profit from a slow decline or stable prices. Selling out-of-the-money EUR/USD call options can generate income while providing some protection against small price increases. Although implied volatility is currently lower than during the trade-war discussions of 2025, it still offers enough premium to make these strategies worthwhile. Additionally, the widening interest rate gap between the US and the Eurozone is now more significant than it was a year ago. Utilizing futures or forward contracts to bet on further Euro weakness against the Dollar could be effective, especially with central bank meetings coming up. This strategy helps guard against the chance of the ECB signaling rate cuts before the Federal Reserve takes action. Create your live VT Markets account and start trading now.

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In February, South Korea’s BOK manufacturing BSI rose from 70 to 73

South Korea’s Bank of Korea (BOK) Manufacturing Business Survey Index (BSI) improved from 70 to 73 in February. This index reflects positive feelings among businesses in the manufacturing sector. FXStreet provides various content about how economic factors affect different currencies. This includes changes in the Japanese Yen due to fiscal issues and a decline in the US Dollar Index near 97.00 because of uncertainty with the Federal Reserve.

Currency Pair Updates

Recent updates show AUD/USD staying above 0.6900, reaching 16-month highs, while USD/CAD is slightly up over 1.3700. The People’s Bank of China set the USD/CNY reference rate at 6.9858, up from 6.9843. NZD/USD has pulled back from recent four-month highs, falling closer to the mid-0.5900s due to profit-taking. Additionally, reports highlight Hyperliquid’s HIP-3 platform achieving a significant milestone and Tether Gold controlling 60% of the tokenized gold market. FXStreet highlights important economic updates and legal information about market risks. It emphasizes the need for independent research when making financial choices, reminding users that investments in the market carry significant risks. The platform does not provide personalized investment advice. The ongoing weakness of the US Dollar is creating clear trends, pushing currency pairs like EUR/USD above 1.1900 and GBP/USD near 1.3700. This is largely due to market expectations for a dovish Federal Reserve, particularly after recent US jobs data showed slower hiring than anticipated. Derivative traders might find value in call options on major currencies against the dollar, expecting this weakness to continue until the next Fed meeting.

Gold Momentum and Market Trends

Gold is gaining significant momentum, nearing $5,050. This reflects a broader risk-off sentiment fueled by geopolitical uncertainty and unclear central bank policies. In 2025, demand for tokenized gold surged as investors sought safe havens. The high implied volatility in gold derivatives creates opportunities, and traders may explore strategies that profit from price stability if upcoming Fed announcements ease market concerns. The increase in South Korea’s manufacturing BSI to 73 brings some regional optimism. This is backed by recent government data indicating a 4.2% year-over-year rise in semiconductor exports for December 2025, marking the first increase in sixteen months. This could signal a bottoming of the sector, prompting traders to consider bullish positions on the Korean Won or related equity indices. Central bank decisions this week will be crucial and likely lead to market volatility. The US Dollar Index is at a key support level around 97.00, and unexpected news from the Fed could cause a sharp market reaction. Traders should prepare for this by considering options strategies like straddles, which can benefit from significant price movements in either direction without needing to predict the outcome. Create your live VT Markets account and start trading now.

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US equities rise amid political uncertainty as S&P 500 gains from better-than-expected earnings

US stocks started the week on a positive note. The S&P 500 rose 0.5 percent, the Dow Jones Industrial Average increased by 0.3 percent, and the Nasdaq Composite gained 0.6 percent. Major tech companies like Apple and Meta helped drive these gains as they prepare to report their earnings. However, there were concerns about political risks. President Trump threatened tariffs on Canada, which ties into a potential trade deal with China. Worries about federal funding and immigration policy in Washington raised fears of a government shutdown.

Gold Hits New High

Gold reached a new high, surpassing $5,100 per ounce. This reflects cautious investor sentiment due to political and fiscal uncertainties. In the commodities market, gold miners such as Newmont reported significant increases. Shares of Novo Nordisk rose with the success of oral Wegovy in the obesity treatment market, while rival Eli Lilly lagged behind. Earnings season is entering a crucial phase, with over 90 S&P 500 companies set to report. About 75 percent of these companies have exceeded earnings forecasts, although revenue growth has slowed. Market players are looking forward to the Federal Reserve’s upcoming rate decision. No changes are expected, but there is focus on hints about future rate cuts. The Dow Jones Industrial Average, which consists of 30 major US stocks and is price-weighted, feels the impact of corporate earnings, quarterly results, and economic data. Dow Theory, created by Charles Dow, helps identify major stock market trends. It also includes trading methods like ETFs and options. As markets balance positive earnings with political anxieties, implied volatility has clearly risen. The CBOE Volatility Index (VIX) recently climbed above 17 from a low of around 13 earlier this month. This situation suggests that traders should consider strategies that benefit from price fluctuations, not just market direction.

Protecting Portfolios Amidst Rising Volatility

Gold’s rise to over $5,100 an ounce signals caution among investors, driven by concerns about tariffs and federal funding. To protect portfolios, buying put options on broad market ETFs like SPY or QQQ serves as a direct hedge against a possible downturn in the coming weeks. A similar flight to safety occurred during the budget negotiations in the fall of 2025, which rewarded those who hedged. Earnings season provides opportunities for volatility trades, especially with major tech companies reporting. While about 75% of companies have exceeded earnings estimates, this is below the five-year average of 77%, indicating that large surprises are becoming less common. Therefore, using straddles on stocks like Apple or Meta could be beneficial, allowing traders to profit from significant price moves in either direction after their announcements. Everyone will be watching for the upcoming Federal Reserve announcement for signs regarding rate cuts. According to the CME FedWatch Tool, futures markets currently suggest a roughly 60% chance of a quarter-point cut by the September 2026 meeting. If the Fed’s message seems more cautious than expected, it could lead to a sell-off, making short-term puts a smart tactical move. Specific sector trends are also revealing clear opportunities for derivative trades. The strength in gold makes call options on miners like Newmont appealing to take advantage of the current momentum. In healthcare, the performance gap between Novo Nordisk and Eli Lilly offers a chance for a pairs trade using options—buying calls on Novo while purchasing puts on Lilly to benefit from their differing results. Create your live VT Markets account and start trading now.

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An unexpected twist in the SP500 Elliott Wave analysis, but progress continues as expected.

The SP500 (SPX) seems to be moving into the 3rd part of a 3rd wave, which is expected to lead to a final 5th wave. Earlier predicted patterns suggest the possibility of an overlapping ending diagonal (ED), which could affect the target zone’s lower limit (~7345). Recently, the index fell unexpectedly from its peak of 6986 down to 6789, breaking through the 4th warning level and making the immediate 3rd of the 3rd-wave scenario no longer valid. Now, the index shows signs of forming a larger ending diagonal with a 3-3-3-3-3 pattern. The rally from December to January had its W-a between 0.618 and 0.764 times the previous higher rally, which fits expected ratios. If the index remains above the lows of December and November, particularly last week’s low of 6789, the 3rd wave’s W-c could begin.

Target Levels And Divergence

The 3rd wave usually targets a 123.6-138.2% extension of the 1st wave, which we now expect between 7185-7235. This aligns with the 161.8% extension at 7218. Currently, there is no divergence between the Advancing/Declining line and the price, making a bearish outlook hard to support, even with the emerging ending diagonal. Once this pattern is completed, we anticipate a multi-month correction down to around 5800 +/- 300 before aiming for over 8100. The recent drop in the S&P 500 from its January 12 high of 6986 has altered our outlook. We now think the market is forming a more complicated, overlapping pattern called an ending diagonal, suggesting a bumpy final push higher rather than a straightforward rise. This perspective is backed by the CBOE Volatility Index (VIX), which has stayed relatively low, around 15, even during last week’s dip to 6789. There are no signs of widespread panic in the market, indicating that the recent dip may be a temporary setback rather than a strong trend reversal. This decline followed an unexpectedly high inflation report from early January 2026, which briefly lowered expectations for a more lenient Federal Reserve. In the coming weeks, it’s vital to monitor key price levels to manage risk. A drop below last week’s low of 6789 would signal a serious warning to reduce bullish positions. The crucial support levels to watch are the December 2025 low of 6720 and the November 2025 low of 6521.

Market Participation And Correction Preparedness

If the index decisively moves back above 6986, it would confirm that the next upward leg is starting, creating opportunities for bullish trades. Such a break would likely lead to a rally toward the target zone of 7185-7235. Typically, the final stages of a rally, like the one in late 1999, can be quite turbulent. Importantly, overall market participation is still supporting the upward trend for now. The cumulative NYSE Advance/Decline line is following the index closely and is not showing signs of negative divergence that often happens before major market tops. Without this internal weakness, it’s hard to justify taking a strongly bearish position at this time. However, since an ending diagonal is a terminal pattern, this rally may be nearing its end. As the index approaches our 7200 target, we should prepare for a significant multi-month correction down to the 5800 area. Cautious traders might want to plan ahead by considering longer-term protective puts or VIX call options as we near new highs. Create your live VT Markets account and start trading now.

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