On the daily chart below, we can see that as the sellers leant on the red long period moving average, the price sold off and cracked again the strong support at 11492. The recent fall was caused by the failure of the Silicon Valley Bank and the subsequent fear that there could be a contagion in the banking system leading to a credit crunch.
The market in fact closed on Friday on a sour note. During the weekend though, the Treasury and the Fed worked on a solution and came up with a new emergency lending facility that would protect the depositors and give the banks the chance to convert their long term securities at the original value instead of being marked to market.
This welcome development turned the risk sentiment around and the market rallied overnight which will make it open higher.
On the 4 hour chart below, we can see that the price has extended below the key support at 11492 again as the sellers piled in with the risk off sentiment last week. The market is likely to reopen back near the 11492 level and that’s where the buyers will start to fight the sellers defending the level ahead of the CPI report.
The market has now priced out completely the chance of a 50 bps hike at March meeting and there’s even a little chance of no hike. A hot CPI report should change this pricing and give the sellers some control again, while a miss would give the buyers more conviction to rally and make higher highs.
On the 1 hour chart below, we can see that at the 11492 resistance we have confluence with the 61.8% Fibonacci retracement level and the trendline. This will be the first zone where the sellers will lean on with defined risk. If the buyers manage to extend higher, the sellers will look at the major trendline as the last line of defence.
