12:40, 28 September

Eases from All Time High as Fed’s Powell Changes Tune

The US30 index has enjoyed a strong last couple of weeks pushing through the previous resistance level at 26200 and reaching a new all-time high before easing in the last few days. The 26200 level will now likely provide some support should the index continue to decline. For several weeks the US30 index had been content to trade within a narrow range near 2018 highs under 26200. It was only towards the end of August that the US index surged higher to a then six months high before the recent consolidation. Similarly, it surged higher to above 25500 throughout July before easing and enjoying some support from around 25000.

The 25000 level had rejected the index on several occasions throughout this year. The 25000 level has been significant as it has offered lots of resistance and would have come as no surprise when it supported the index back in July and August. Around the end of June, the index spent several days consolidating above 24000 after a strong fall over several weeks prior to that. The fall saw the index move sharply lower from a three month high above the resistance level at 25000 down to a near two month low several weeks ago.

In the second half of May, the index was meeting stiff resistance right at 25000 which forced the index lower down to a three week low. In the few weeks before last week’s easing lower, the index had moved quite strongly off the now well-established support level at 23500. This recent range trading is not unexpected after the strong movement higher throughout all last year.

The U.S. Federal Reserve's raised rates by 25 basis points on Wednesday, its third rate rise of the year, bringing its target range for its benchmark overnight lending rate to between 2 - 2.25%.  In doing so it removed the long-standing word "accommodative" from its policy statement. The Federal Reserve Chairman Jerome Powell also had a new message for the markets: stop watching the central bank’s words or forecasts, rather focus on the data on jobs, wages and inflation for signals on monetary policy.  Powell said in a press conference on Wednesday that the removal of the “accommodative” wording was not a policy signal at all, as he noted that the U.S. economy is having a “particularly bright moment” with unemployment expected to remain low, inflation stable, and no recession in sight. Powell said, “The question we are answering is, how do we provide the economy just the right amount of support - not too much, not too little - to sustain the recovery and achieve our statutory goals” of full employment and 2 per cent inflation. We don’t want to suggest either that we have this precise understanding of where accommodative stops or suggest that’s a really important point in our thinking. What we’re going to be doing ... is carefully monitoring incoming data.”