On the daily chart below, we can see that the price is now getting closer to the support zone at 1920. That will be the last line of defence for the buyers as a break lower should give sellers conviction that the sentiment is really turning.
The sentiment changed yesterday as Fed’s Bullard (hawkish, non-voter) acknowledged that he was open to the idea of another 50 bps hike in February and he’s still open for it at the March meeting. Moreover, he keeps his view of a higher terminal needed than what was projected in December 2022.
A break lower of the 1920 support will also turn the moving averages downward giving another signal of a change in trend. The target for the buyers in case they manage to hold the line would be again the high at 2030 and the first target for the sellers in case we see a break lower would be 1720.
In the 4 hour chart below, we can see that the price managed to break the trendline but then went sideways as the support at 1920 saw buyers defending the line.
We saw a similar rangebound price action in other markets as there’s little conviction from both sides on what’s next for the economy. It’s likely that we will see the support holding today unless the Fed speakers today sound very hawkish.
In the 1 hour chart, we can see the recent catalysts and the absolute choppiness that’s been going on in the markets for over a week now. The levels are set though: get below the 1920 support and we should see the sellers coming in aggressively, on the other hand, get above the resistance at 1970 and we should see the buyers regaining strength.
On the fundamentals side, the tides are turning. The moderation in inflation seems to be slowing. Economic activity seems to have picked up. And the labour market remains secularly strong. The market is sensing that the Fed will need to do more and the risk that something will break at some point increases by the day.
