The Federal Reserve surprised the market by maintaining interest rates at 5.00-5.25%, but with a slightly more hawkish stance, as they raised the projected terminal rate in the Dot Plot by 50 basis points. In order to gather more economic data , the Fed decided to pause at this meeting before considering another potential interest rate hike in July. This decision appears reasonable considering the weaker details in the latest Non-Farm Payrolls (NFP) report and further disinflation observed in the latest Consumer Price Index (CPI) report, although the core readings remain persistently high.
During the press conference, Fed Chair Powell indicated that the July meeting is "live," yet he avoided making any pre-commitments. Initially, the market reacted negatively when the Dot Plot was released, leading to a decline, but the market quickly rebounded to its original levels once Powell's press conference started. This demonstrates the Fed's readiness to take additional measures to combat inflation, although their actions will ultimately hinge on the forthcoming economic data.
Russell 2000 Technical Analysis – Daily Timeframe
On the daily chart, we can see that the Russell 2000 has eventually reached the key 1920 resistance zone. We saw a rejection there as some profit taking may have unfolded due to the FOMC risk and strong sellers may have leant on that level with a defined risk just above it to target a return to the 1820 level. The buyers now will need to break above the 1920 resistance to get the conviction for another rally into the 2020 level.
Russell 2000 Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that we had a divergence with the MACD right when the price was extending into the 1920 resistance. This is generally a sign of weakening momentum often followed by pullbacks or reversals. Indeed, the price pulled back and we will see if it will be a bigger one or the Russell 2000 just need to take a breather before another push to the upside.
Russell 2000 Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see the two big levels to watch, that are the resistance at 1920 and the support at 1820. From a risk management perspective, the buyers would be better off leaning on the 1820 support where we can also find the 50% Fibonacci retracement level. Otherwise, they should wait for a breakout to the upside and ride the bullish wave into the 2020 resistance. The sellers, on the other hand, will want to see the price breaking below the 1820 support to target the 1723 low.
Today, we have the release of two significant reports: the US Jobless Claims and Retail Sales. Tomorrow, we will turn our attention to the University of Michigan Consumer Sentiment survey. A substantial miss in the Jobless Claims data could potentially raise concerns for the market, suggesting a rapid deterioration in the labour market. Conversely, if the figures outperform expectations, it should help maintain the market's optimistic trend. Additionally, market participants will closely monitor the long-term inflation expectations in tomorrow's UMich report, hoping for a lower figure. A higher reading could indicate a potential de-anchoring of inflation expectations, which might cause some uneasiness.
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