Following the end of the blackout period after the FOMC meeting, many Fed officials shared their views last week. The prevailing sentiment remains consistent: awaiting data to determine the appropriate extent of tightening measures. Although the majority anticipates two additional rate hikes this year, they consistently reiterate that such decision is contingent upon the data. The data seen last week inclines further towards a rate hike, thanks to upside surprises in the housing market data, good US Jobless Claims figures, and the US Services PMI beating expectations. Naturally, the forthcoming NFP and CPI reports will heavily influence the situation. However, if we continue to see good data, the Fed is likely to raise rates in July, aligning with the current market expectations.
Russell 2000 Technical Analysis – Daily Timeframe
On the daily chart, we can see that the Russell 2000 couldn’t break above the 1920 resistance zone and eventually retraced all the way back to the previous resistance turned support at 1820. This pullback basically erased all the gains seen after the breakout in the beginning of June.
We can also see that there is the 50% Fibonacci retracement level and the red 21 moving average near the 1820 support, so the buyers have a strong zone here where they can lean on with defined risk below the level and target the 1920 resistance. The sellers, on the other hand, will want to see the price break lower to jump onboard and ride the likely selloff into the 1720 support.
Russell 2000 Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that we already have a downtrend on this timeframe as the moving averages are crossed to the downside and the price keeps printing lower lows and lower highs. We can also notice that this retracement was signalled by the divergence with the MACD when the price made the last leg higher into the 1920 resistance.
Russell 2000 Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that the bearish momentum is starting to slow down with the price coming closer to the strong 1820 support. If we see a break lower, the sellers should pile in more aggressively and extend the fall into the 1720 support. The buyers, on the other hand, should lean on this support and target the 1920 resistance. Alternatively, more conservative buyers can wait for the price to make a new higher high and the moving averages to cross to the upside before piling in and ride the likely bullish wave into the resistance.
On the data front, this week is even less exciting than the previous one with only the US Jobless Claims and the US PCE reports scheduled towards the end of the week. However, we will still get more comments from other Fed members. Nevertheless, since we have yet to see any significant economic indicator, it is unlikely that they will provide signals regarding the next course of action at this stage.