Russell 2000 Technical Analysis | Forexlive

Last Friday’s NFP report once again surpassed expectations,
extending the record streak to 14 consecutive beats on the headline number.
However, upon examining the report’s details, they weren’t as impressive. The
unemployment rate experienced a notable increase from 3.4% to 3.7%, marking the
largest month-over-month jump since the pandemic began. Additionally, the
average workweek hours showed a slight decline, which often signifies employers
reducing hours before laying off workers.

All things considered, this
report offered something for everyone. The optimists interpreted the solid job
growth positively, while the higher unemployment rate and soft average hourly
earnings suggested less labour market tightness, potentially alleviating
inflationary pressures. Some may view the lower average weekly hours worked as
a return to the pre-pandemic trend.

On the other hand, the
pessimists paid closer attention to the report’s details rather than the
headline number, recognizing that it’s the trend rather than the absolute
number that holds more significance.

Russell 2000 Technical
Analysis – Daily Timeframe

On the daily chart, the Russell 2000 has finally
broken out of the 3-month-long range extending the rally to the 1842 level. For
the buyers a good spot for long trades would be the resistance turned support at the
1820 level with a defined stop just below it. The sellers, on the other hand,
may look into fading this latest rally and increase shorts if the price returns
back within the range as it would possibly turn into a fakeout.

Russell 2000 Technical
Analysis – 4 hour Timeframe

On the 4 hour chart, we can see more closely the
big rally out of the NFP report. The price overextended a bit as depicted by
the distance from the blue 8 moving average.
Generally, in such instances, the price consolidates or pulls back to the
moving average to find a new equilibrium and continue in the original
direction.

Russell 2000 Technical
Analysis – 1 hour Timeframe

On the 1 hour chart, we can see the support area
where the buyers should lean onto with a defined risk just below it. In fact,
we can find there the resistance turned support of the range, the red 21 moving
average, the 38.2% Fibonacci
retracement level and an upward trendline. If
the buyers fail here, the sellers are likely to pile in more aggressively as a
break below the trendline would switch the momentum to the downside.

Today,
the main risk event is the US ISM Services PMI report.

• Considering the previous
  month’s impressive performance of the S&P Global Services PMI, there is
  anticipation for a favourable reading in the ISM report. Should the data exceed
  expectations, particularly if the prices paid sub-index indicates a lower
  value, we could witness a rally in the Russell 2000 due to the expectations of
  a soft landing.
• On the contrary, if the
  data falls short of expectations, it might cause some weakness in the market,
  potentially leading to the anticipated pullback or even a complete fakeout
  mentioned earlier.