Last week the Fed decided to pause at 5.00-5.25% because it wants to see more economic data before considering further hikes as it tries to find the right level of monetary restraint to bring inflation back to target without triggering a bad recession or breaking something in the economy.
Yesterday, Fed Chair Powell confirmed during his testimony to Congress that they are focused on bringing inflation down to target but there’s still a long way to go. In fact, he added that if the economy performs as expected, the additional two rate hikes pencilled in the Dot Plot are a “pretty good guess”.
Russell 2000 Technical Analysis – Daily Timeframe
On the daily chart, we can see that after the very strong rally since the start of June, the Russell 2000 stalled at the key 1920 resistance zone and pulled back. From a risk management perspective, the buyers would be better off to lean on the 1820 support with a defined risk below the level, but such a big fall looks unlikely at the moment unless the data deteriorates a lot pointing to an imminent recession.
Russell 2000 Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that we have a strong support level at the previous swing low at 1860 where we can also find the 38.2% Fibonacci retracement level for confluence. This may be the first level where the buyers can lean on with a tight risk below and target again a break above the 1920 resistance. The sellers, on the other hand, may want to see the price breaking below the 1860 support to target the 1820 zone.
Russell 2000 Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that the short term trend is bearish as the price keeps making lower lows and lower highs and the moving averages are crossed to the downside. More conservative buyers may want to see the moving averages cross to the upside on this timeframe to confirm the bounce on the 1860 support before piling in.
The next data to watch are the US Jobless Claims today and the US PMIs tomorrow.
