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The Russell 2000 surged to new highs following the
miss in the US CPI report.
Looks like the market is still trading based on the inflation and interest
rates expectations and ignoring the softening in the labour market and growth
data. Yesterday, the US Retail Sales were
more tepid compared to the prior months, but they still came out better than
expected, and the US PPI data
missed forecasts by a big margin across the board. The bears are having a hard
time to fight this positive sentiment and perhaps it will take a clear uptrend
in the unemployment rate to switch the market’s focus.

Russell 2000 Technical
Analysis – Daily Timeframe

Russell 2000 Daily

On the daily chart, we can see that following the
miss in the US CPI report, the Russell 2000 broke above the trendline and
surged into the key resistance zone
around the 1820 level. The price yesterday rejected the resistance as the
sellers stepped in with a defined risk above the level to position for a drop
back into the lows. This candlestick formation is called “shooting star” and
it’s generally a reversal pattern, but in this case, it might just be a signal
for a pullback from overstretched levels.

Russell 2000 Technical
Analysis – 4 hour Timeframe

Russell 2000 4 hour

On the 4 hour chart, we can see that the buyers
will have two support zones where they might lean on to position for a rally
into new highs. The first one stands around the 1775 level where we can find
the previous swing high, the 38.2% Fibonacci retracement level
and the blue 8 moving average. The
second one stands around the upward trendline where we can find the confluence with the
61.8% Fibonacci retracement level and the red 21 moving average.

Russell 2000 Technical
Analysis – 1 hour Timeframe

Russell 2000 1 hour

On the 1 hour chart, we can see more
closely the support levels for the buyers. It’s impossible to know which one
will be the right one, so it might be a good idea to split the long position in
half. The sellers, on the other hand, will want to see the price breaking below
the upward trendline and the 1720 support to invalidate the bullish setup and
position for a break below the cycle lows.


Today the market’s focus will be on the latest US
Jobless Claims figures given the recent softening in the labour market data.

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