On 6/7 a reliable currency indicator was suggesting the S&P 500 was at a low and could rally as much as 13% , in the chart below. (see post here)
Prior to calling for this rally, the currency ratio had called for a 7% decline, and the markets followed through! (see post here)
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The Australian Dollar/U.S. Dollar ratio has a pretty good track record for predicting short term rallies and declines over the past couple of years!
The action this week in the AU$/US$ ratio is suggesting higher prices for the ratio and the 500 index.
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Summary…..One of the better tools of late to predict rallies and declines in the S&P 500 is the AU$/UD$ ratio and the break above falling resistance at (2) suggests higher ratio and 500 prices. The last two times the ratio broke resistance the 500 index rallied 13%. Different this time around? Time will tell.
Excess Dollar bulls doesn’t hurt this ratio either(See post here)
Coincidental indicator IMO. Both are viewed as “risk on” and trade with perhaps the highest correlation of any “pair” in the entire world. The key to watch is when one breaks from the other, but until then watching as an upside “key” doesn’t tell you much IMO.