On the daily chart below, we can see that the resistance at the 12274 level held as the strong NFP report sent the market lower.
Buyers had a hard time in February as pretty much all economic data beat expectations and made the market to revise higher future interest rates expectations and price out interest rates cuts by the end of this year. To sum it up, the soft landing narrative where inflation returns to target quickly without economic pain got hit hard.
The key support level at 11492 with the 38.2% Fibonacci retracement level got breached on Friday as the US PCE report surprised to the upside on all fronts. This is a bad sign for the buyers and opens the door for a big move to the 10092 level for the sellers.
On the 4 hour chart below, we can see more closely how the market opened lower on Friday after the US PCE report and it may now pull back to retest the broken level before continuing its bearish trend.
We will have some key leading economic indicators this week like the ISM Manufacturing and Non-Manufacturing PMIs. If those beat expectations, then we should see the selling momentum intensify and possibly lead to a test of the 11000 level.
On the 1 hour chart below, we can see the near term picture and the possible spot where the sellers may start to pile in again. The previous support at 11492 should now act as resistance. For further confluence we have the downward trendline, the red long period moving average and the 50% Fibonacci retracement level.
That will be a strong area for the sellers with defined risk and a high reward potential. The buyers will need to break through that zone to find some conviction for higher highs, but it looks unlikely without some key data supporting the move.
