Last week
was the Jackson Hole Symposium week and we
have heard from many Fed members about their opinions on the momentary policy
going forward. There seems to be a consensus for a pause in September as they
try to “carefully” assess the lag effects of their tightening to date.
Nonetheless, they are ready to do more if conditions require further tightening
and in fact, they keep reaffirming their data dependency. The economic data
since the last FOMC meeting has been surprising to the upside with the labour
market remaining very strong, but the last two inflation reports showed the Core M/M
inflation rising by just 0.16%. Overall, it looks like a soft landing scenario
but the latest US PMIs showed
that there might be pain ahead.
Russell 2000 Technical
Analysis – Daily Timeframe
Russell 2000 Daily
On the daily chart, we can see that the Russell
2000 sold off from the 2030 resistance zone all
the way back to the 1820 support area. The price has been consolidating ever
since it tested the support zone as the market awaits new catalysts to push it
in either direction. Nevertheless, this is a key level, and we can expect the
buyers to pile in here with a defined risk below the level to target the 1920
resistance. The sellers, on the other hand, will want to see the price breaking
lower to pile in even more aggressively and take the Russell 2000 into the 1720
level.
Russell 2000 Technical
Analysis – 4 hour Timeframe
Russell 2000 4 hour
On the 4 hour chart, we can see that the buyers are
indeed leaning on the support zone as we got two big candlestick wicks in what
could end up being a double bottom. The
price will need to break above the downward trendline and the
38.2% Fibonacci retracement level to
confirm the pattern, but we can expect the buyers to come into the market
already expecting the breakout.
Russell 2000 Technical
Analysis – 1 hour Timeframe
Russell 2000 1 hour
On the 1 hour chart, we can see the quick
drop and recovery soon after the Fed Chair Powell speech at the Jackson Hole
Symposium as he reaffirmed their data dependency but stressed also the need to
be careful. We can also see that we have an interesting zone around the 1867
level where the price has reacted to multiple times. Although it’s better to
stay out of the ranges and wait for a clear breakout, a break to the upside of
this 1867 zone may lead to a rally into the 38.2% Fibonacci retracement level
and possibly even a breakout, while the sellers may lean onto it to position
for more downside expecting a break below the support.
Upcoming
Events
This week is an important one given that we will see
many key labour market data, including the US NFP, before the next FOMC
meeting. We start tomorrow with the US Consumer Confidence and the US Job
Openings. On Wednesday, we have the US ADP report. Moving on to Thursday, we
will have the US Jobless Claims and the US PCE data. Finally, we conclude the
week with the US NFP and the ISM Manufacturing PMI on Friday. Although the Fed
keeps all the options on the table, it’s also leaning more towards a pause in
September, so we will need strong data to make the market to expect a hike at
the upcoming meeting.