Fundamental
Overview
The Russell 2000 has been
consolidating around the lows after the quick drop following the FOMC decision in December as the market perceived
it as more hawkish than expected.
The Fed continues to place
a great deal on inflation progress to proceed with further rate cuts as
highlighted by Fed’s
Waller this week. Therefore, the market is waiting for more data to decide
what the Fed is going to do next.
A soft CPI report next week
will likely trigger a strong dovish reaction in the markets, especially
considering the quick rise in Treasury yields in the last couple of months. That
should support the stock market and lead to more gains. Conversely, another hot
CPI isn’t going to help and could trigger another selloff.
Today, we have the US NFP
report and although the CPI is going to have a bigger influence on interest
rate expectations, it’s still going to be a market moving event, especially if
we get big deviations from the expected numbers.
Right now, the market would
want to see soft but not too soft data. A very bad or very hot report could add
more pressure on the market. Watch also wage growth, as Fed’s
Bowman highlighted recently that it’s still above the pace consistent with
their inflation target.
Russell 2000
Technical Analysis – Daily Timeframe
On the daily chart, we can
see that the Russell 2000 is consolidating below the key 2300 level with the price
now approaching the major trendline. If the price gets there, we can
expect the buyers to step in with a defined risk below the trendline to
position for a rally into a new all-time high. The sellers, on the other hand,
will want to see the price breaking lower to increase the bearish bets into the
1993 level next.
Russell 2000 Technical
Analysis – 4 hour Timeframe
On the 4 hour chart, we can
see more clearly the rangebound price action between the 2300 resistance
and the 2220 support. The market is clearly waiting for a catalyst to push into
either direction. The US NFP and CPI reports will be key events for market participants.
Russell 2000 Technical
Analysis – 1 hour Timeframe
On the 1 hour chart, we can
see that we have some minor support and resistance levels on this timeframe. The
buyers will want to see the price breaking above the 2255 level to start
targeting the 2300 resistance, while the sellers will look for a break below
the 2235 level to extend the drop into the major trendline. The red lines
define the average daily range for today.
Upcoming
Catalysts
Today we conclude the week with the US NFP report.
This article was written by Giuseppe Dellamotta at www.forexlive.com.
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