US30

09:42, 09 November

Meets Resistance at 26,200 Again as Fed Leaves Rates Unchanged

In the last couple of weeks the US30 index has enjoyed a strong resurgence moving from multi-month lows back up to the key 26,200 level. However this level has influenced price action again as the index has been sold off slightly in the last 24 hours. In the couple of weeks prior to the strong rally, the index fell sharply again down to its lowest levels in four months, after attempting to rally off support at 25000 several weeks ago. Only a few weeks ago the index dropped down through support at 26200 before rallying higher back above the key 25000 level. After reaching a new all time high earlier last month the US30 index eased a little in the week after and was enjoying some support from the previous key level of 26200, however this has now clearly given away to immense selling pressure.

 

For several weeks in September the US30 index had been content to trade within a narrow range near 2018 highs under 26200, before its recent move higher. 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.

As widely expected, the U.S. Federal Reserve held interest rates steady on Thursday and said ongoing strong job gains and household spending had kept the economy on track.  This was its first meeting since October's market turmoil and this week's midterm elections.“The labor market has continued to strengthen and ... economic activity has been rising at a strong rate,” the Fed said in its latest policy statement, leaving intact its plans to continue raising rates gradually.  The policymaking Federal Open Market Committee (FOMC) unanimously approved keeping the federal funds rate in a range of 2 percent to 2.25 percent.The Fed is tipped to approve a quarter-point rise in December, which would be the fourth of the year. Interestingly there was no mention of the volatility that has torn through financial markets since mid-October in the central bank's statement, however they did note that the unemployment rate "has declined" since the September meeting.  The statement also noted that the "growth of business fixed investment has moderated from its rapid pace earlier in the year."  The U.S. economy has been moving along strongly, and the FOMC reiterated its belief that "economic activity has been rising at a strong rate." GDP growth this year has averaged 3.3% for the first three quarters and is expected to come in around 3% for the final three-month period of 2018.