Russell 2000 Technical Analysis | Forexlive

Last Friday, the NFP report
beat expectations across the board with the unemployment rate falling to 3.7%
vs. 3.9% previously and the average hourly earnings on a monthly basis higher
than expected at 0.4%. The jobs data was followed by a strong University of Michigan Consumer
Sentiment survey where inflation expectations fell much more than expected.

Overall, it was a good day for those in the
soft-landing camp, but it also raised the risk of a hawkish FOMC rate decision
on Wednesday as the Fed might push against rate cuts expectations more
strongly. The Russell 2000 continues to consolidate at the highs as there might
not be that much of an incentive to keep pushing ahead of this week’s risk
events.

Russell 2000 Technical
Analysis – Daily Timeframe

On the daily chart, we can see that the Russell
2000 had a positive day last Friday following the soft-landing data releases
but failed to make a new high. From a risk management perspective, the buyers
would have a better risk to reward setup at the previous resistance now turned support around
the 1820 level where we can also find the confluence with the
trendline, the red
21 moving average and the
38.2% Fibonacci retracement level.
The sellers, on the other hand, will want to see the price breaking below the
trendline to invalidate the bullish setup and position for a drop into the 1720
support.

Russell 2000 Technical
Analysis – 4 hour Timeframe

On the 4 hour chart, we can see that we have
another minor trendline on this timeframe where the buyers could lean onto with
the red 21 moving average adding extra confluence. The sellers are likely to
step in at the 1920 resistance zone with a defined risk above it to position
for a drop into the 1820 support. A break below the minor trendline should see
the sellers increasing their bearish bets into the support.

Russell 2000 Technical
Analysis – 1 hour Timeframe

On the 1 hour chart, we can see that the
latest move higher diverged with
the MACD which
is generally a sign of weakening momentum often followed by pullbacks or
reversals. In this case, as long as the price stays above the trendlines, we
will be in the pullback zone, but if the price breaks the major trendline, a
reversal would be confirmed, and the sellers will regain control. Watch out
also for one last rally into the 1920 resistance as that could make the
divergence even stronger and give the sellers another bearish confirmation to
target the 1820 support.

Upcoming
Events

This week is going to be a big one with the US CPI and
the FOMC rate decision on the agenda. We begin tomorrow with the release of the
US CPI report where the market will want to see how the disinflationary trend
is going. On Wednesday, we have the US PPI data followed by the FOMC rate
decision where the Fed is expected to keep interest rates unchanged. On
Thursday, we will see the US Retail Sales and Jobless Claims figures, while on
Friday we conclude the week with the US PMIs.