Last Friday the US NFP missed expectations for the first time after 14 consecutive beats. The miss though was very slight and still in the range of estimates, and the other data showed the labour market remaining solid with average hourly earnings ticking higher, which is not a good news for the Fed. We saw a brief rally out of the report, but eventually the market gave almost everything back as the focus switched to the US CPI report on Wednesday. The NFP report didn’t change the market pricing for the next FOMC rate decision and a 25 bps hike is still pretty much certain barring a good miss in the Core CPI data.
Russell 2000 Technical Analysis – Daily Timeframe
On the daily chart, we can see that the price couldn’t break above the 1920 resistance zone again and eventually sold off into the 50% Fibonacci retracement level. The moving averages are now crossing to the downside signalling more bearish momentum, but this might be a false signal since the price started to range between the 1820 support and the 1920 resistance now. We will likely need a good fundamental catalyst to break out on either side.
Russell 2000 Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see more closely the range created between the 1820 and 1920 levels. At the moment the sentiment is bearish as the moving averages are crossed to the downside and the sellers are likely targeting the 1820 support level. That’s where we should see the buyers stepping in with a defined risk below the support and target the 1920 resistance. A break below the 1820 support would see more selling pressure coming in and most likely take the Russell 2000 towards the 1720 low.
Russell 2000 Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that the price rallied briefly out of the NFP report into the previous swing low at 1885 where we had also the 61.8% Fibonacci retracement level and then started to erase the rally into the close as the market’s focus switched to the US CPI report. We have a minor support level at 1857 where we might see some buyers coming in but from a risk management perspective, the 1820 support is a much better level where to buy from.
Upcoming Events
This week the main event will be the US CPI report on Wednesday. A miss in the data, especially in the core numbers, should lead to a rally in the Russell 2000 as the market would price out rate hikes and bring the rate cuts forward. On the other hand, if the data beats expectations, we will likely see a general selloff in the markets as the risk sentiment would turn negative due to the expectations of a more hawkish Fed and eventually a worse recession. We conclude the week with the US Jobless Claims on Thursday and the University of Michigan Consumer Sentiment survey on Friday.
See also the video below:
