US500 fell sharply after publication of yesterday’s US CPI figures, however the downward move was halted around key support at 3500 pts which is marked by the lower limit of the 1:1 structure. Sentiment shifted later in the session after the ECB model showed that the scale of interest rate increases may be lower compared to current market expectations. Sentiment was also lifted by speculations that the UK government would U-turn on fiscal policies that rattled financial markets, as well as Beijing's pledge for stronger support to its Covid-stricken economy. Some analysts point to the capitulation of traders who took short positions that triggered the cascade effect.
As a result US500 bounced off its lowest levels since November 2020 and broke above 3,600 pts level. If current risk on sentiment prevails, upward move may be extended to the next resistance at 3800 pts which coincides with 38.2% Fibonacci retracement of the upward wave launched in March 2020.
US500, D1 interval. Source: xStation5
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