On the daily chart below, we can see that the resistance at 11829, which was the last line of defence for the sellers, eventually held. The buyers couldn’t sustain the breakout and failed, leaving on the chart a fakeout.
This was caused by the FOMC decision yesterday where the Fed hiked rates by 25 bps and kept everything unchanged, including the QT and the Dot Plot signalling no rate cuts for this year, even though the market has priced for ones.
This indicates that the Fed is resolute in bringing inflation down to their 2% target and sees also risks around the banking sector that the market may have not yet fully grasped. This should be bad for risk sentiment, but the buyers have demonstrated time after time that optimists can be strong.
On the 4 hour chart below, we can see that the selloff was quite strong yesterday after the Fed’s decision. We may see the sellers again in control today once the market opens, but ultimately it may all hang on the economic data going forward to see if the Fed’s worries are justified.
Today the only data we have is Jobless Claims. It’s likely that a strong reading would be enough for the buyers to step in, while a bad one may increase the fears and lead to risk off.
On the 1 hour chart below, we can see the possible support levels for the buyers. The first one is the 38.2% Fibonacci retracement level, while the second one is the 50% level where we have also the confluence with the previous strong 11492 level and the broken trendline.
The sellers, on the other hand, will be watching carefully if the price goes back below the trendline and the 11492 support as that would give them even more conviction to jump in.
