Last
week, the Fed hiked the interest rates by
25 bps as widely expected keeping everything unchanged. Fed Chair Powell
reiterated their data dependency and kept all the options on the table. The
economic data since the FOMC meeting has been pretty solid and the labour
market indicators keep on running hot. This week we got a selloff that began
with the rating agency Fitch downgrading US credit
rating to AA+ from AAA and then extended further as the US ADP report
came in hot again.
Russell 2000 Technical
Analysis – Daily Timeframe
Russell 2000 Dailky
On the daily chart, we can see that the Russell
2000 eventually reached the key resistance zone
around the 2020 level and rejected it. The price pulled back into the red 21 moving average where we
saw a bounce as the buyers stepped in for another rally towards the resistance
targeting a breakout.
Russell 2000 Technical
Analysis – 4 hour Timeframe
Russell 2000 4 hour
On the 4 hour chart, we can see that we had a divergence with the
MACD coming
into the resistance zone which was a sign of weakening momentum that is
generally followed by pullbacks or reversals. The price is now at a strong
support zone around the 1960 level where we are likely to see the buyers piling
in with a defined risk below the zone to target another rally and eventually a
breakout. The sellers, on the other hand, will want to see the price breaking
lower to pile in more aggressively and extend the selloff into the 1920
support.
Russell 2000 Technical
Analysis – 1 hour Timeframe
Russell 2000 1 hour
On the 1 hour chart, we can see that the
sellers recently stepped in around the 1980 level where we have the 38.2% Fibonacci
retracement level and a previous swing level. We are
likely to see some consolidation between the 1960 support and 1980 resistance
awaiting the NFP report. If the price breaks above the 1985 level though, the
buyers will have a confirmation of the bounce and should pile in more
aggressively to target the breakout.
Upcoming
Events
Today, all eyes will be on the US NFP
report. The Fed will see another NFP report before the next meeting so this one
won’t decide what they are going to do but it can change market expectations,
nonetheless. It’s hard to see what the market is going to do with this data,
but a strong report should weigh on the Russell 2000 as the market would expect
the Fed to remain hawkish and weak readings are likely to cause a selloff as
the market may start to fear a recession on the horizon. The technicals here
should be more helpful to manage risk and position in line with the flow.