On the daily chart below, we can
see that after bouncing from the 1723 support, the market started to rally
again towards the resistance at the 50% Fibonacci
retracement level. The market has been stuck in this range
since the Silicon Valley Bank collapse in mid/March.
There’s clearly uncertainty in
the market around the economy and the interest rates path. The recent economic
data has been better than expected and Fed officials acknowledged that if they
don’t see weakness in the data, they will lean towards another hike at the June
meeting. In fact, after another beat in Jobless Claims yesterday, the market
started to price a 30% chance of another hike, which is up from just 2% a few
weeks ago.
On the 4
hour chart below, we can see that the price has run into a minor resistance defined by the swing high at the
1796 level. There’s not much to glean from this chart as the price action is
messy in a rangebound market and there are almost no clear support and
resistance levels. Nevertheless, we can sense that there’s some short-term
optimism around the debt ceiling saga as we can see from the big spike on
Wednesday when Biden
said that he’s confident on an agreement. For now, we may have a “buy the
rumour” type of trade and the price may rally all the way up to the 50%
Fibonacci retracement level.
On the 1 hour chart, we can see
that the price is struggling a bit at the swing high resistance, but it’s
likely that we’ll see a break. The market is likely to extend the rally towards
the 1820 level on a breakout. If we get a pullback though, the trendline is the first line of support,
followed next by the swing low at 1768. The sellers will want to see the price
breaking below the trendline to jump onboard and target the 1768 level, with a
further breakout opening the door for a revisit of the 1721 support.
We can also notice that the price
is diverging with the MACD right at the resistance. This is
generally a sign of weakening momentum and it’s often followed by pullbacks or
reversals. Today, the market will focus on Fed
Chair Powell and, although he’s expected to just reiterate what he said at the
FOMC press conference, more hawkish or dovish comments should trigger big
reactions.