Russell 2000 Technical Analysis | Forexlive
The Fed members keep on
repeating the same thing: they skipped the June hike because they wanted to see
more data before deciding on further tightening. Although the majority of them
anticipates two rate hikes this year, they continually stress that these
decisions are contingent upon the data. Just yesterday, Fed Chair Powell reiterated the resilience of the
economy and expressed openness to the possibility of two or more consecutive
rate hikes if the labour market remains strong.
The data received following
the last FOMC meeting strengthens the case that we will indeed see further rate
hikes. The housing market data was very strong, the US Jobless Claims remain stable, the US Services PMI continues to show expansion, and
the latest Consumer Confidence report beat expectations by a big
margin. Naturally, much will depend on the forthcoming NFP and CPI reports.
However, if we continue to get such good data, the Fed will indeed increase
rates twice instead of the market’s current expectation of a single hike in
July.
Russell 2000 Technical
Analysis – Daily Timeframe
On the
daily chart, we can see that the Russell 2000 couldn’t break the 1920 resistance zone and
fell all the way back to the previous resistance now turned support at 1820.
The price has bounced pretty strongly from this support zone and it now looks
like the Russell 2000 is targeting a break above the 1920 resistance. Is this
the start of another rally or a dead cat bounce?
Russell 2000 Technical
Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that we also had a
50% Fibonacci retracement level
near the 1820 support which gave more confluence and
strength to the level. The moving averages have now
crossed again to the upside which signals that the bullish momentum is
prevailing. All else being equal, the Russell 2000 can keep on rising barring
recessionary fears. Of course, a break below the 1820 support would invalidate
the bullish setup and take us quickly back to the 1720 support.
Russell 2000 Technical
Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that the
price has recently broke above a swing high, retested it, and then made a new
higher high. This is a bullish market structure, but we can also notice that
the last leg higher is diverging with
the MACD, which
is a sign of weakening momentum often followed by pullbacks or reversals. In
this case, the price may pull back into the 1855 support where we should see
the buyers stepping in with a defined risk below the level and target the 1920 resistance.
The sellers, on the other hand, will want to see the price to break below the
level to pile in and extend the fall back into the 1820 support and then target
further downside into the 1720 low.
On the data front, we have the US Jobless Claims today and the
US PCE report tomorrow. Strong readings will reinforce the case for more than
one hike, while weak figures may change the Fed’s mind on multiple hikes.