Russell 2000 Technical Analysis | Forexlive

The soft-landing narrative
is in full swing in the markets as the US CPI report missed expectations across the board.
The strong US labour market and the rising consumer sentiment add to the expectations that the US
might avoid a hard landing with inflation coming back to the Fed’s 2% target
without too much damage in the economy. As long as this narrative holds, we
should keep seeing the Russell 2000 making new highs.

Russell 2000 Technical
Analysis – Daily Timeframe

On the daily chart, we can see that the Russell
2000 has finally broken out of the 1920 resistance zone
following the miss in the US CPI report. The price has now pulled back into the
resistance turned support as the
price was overstretched after the strong rally from the 1840 level. This is
where we should see the buyers piling in with a defined risk below the support
zone and target the 2030 resistance. The sellers, on the other hand, will want
to see the price falling back below the support to start targeting the 1820
level.

Russell 2000 Technical
Analysis – 4 hour Timeframe

On the 4 hour chart, we can see that we already had
a reaction near the 1930 level as the buyers started to pile in following the
big beat in the University of Michigan Consumer Sentiment report. The closer
the price gets to the support zone, the better the risk to reward for the
buyers as they can have a tighter stop below the level. For the sellers is just
a waiting game as the price either falls below the 1920 support zone or rallies
to the 2030 resistance where they should step in more aggressively.

Russell 2000 Technical
Analysis – 1 hour Timeframe

On the 1 hour chart, we can see that the
Russell 2000 couldn’t rally past the 1965 level as the price was overstretched
and the momentum waned. We can also see that we have the 38.2% Fibonacci
retracement level of the entire move up from the lows
sitting near the 1920 support. This adds another layer of confluence for
the buyers and increases the chances of the support holding.

Upcoming
Events

This week is pretty bare on the data front with just the
US Retail Sales tomorrow and the US Jobless Claims on Thursday. Given the
soft-landing narrative dominating the sentiment in the markets we are likely to
see a big selloff only if the data misses by a big margin as a little miss
should just be an opportunity to buy the dip. If the data beats expectations
though, the Russell 2000 should easily rally into the 2030 resistance.