US30

12:36, 19 December

Remains Below 24000 Level as Fed Expected to Raise Rates



In the last couple of weeks the US30 index as again fallen sharply down through any support at the 25,000 level and then also through the 24,000 level down to its lowest level in seven months. It is currently attempting to rally and remain within touch of this level. A few weeks ago it enjoyed a healthy surge higher climbing back above the key 25,000 level to above 26,000 before reversing sharply and falling lower. The last couple of months have now seen the index moving sharply between 24,000 and 26,000 as the volatility and the swings back and forth have intensified and presented the most volatile the index has been in many months.

 

For several weeks in September the US30 index had been content to trade within a narrow range near 2018 highs under 26200. 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 markets are expecting the Federal Open Market Committee, when it announces its decision, to raise the federal funds rate by one-quarter of a percentage point to 2.5 percent.  That rate, which influences but doesn’t control other borrowing costs, was raised by the same amount to 2.25 percent in September.  This rise would keep rates low by historical standards but put them at the highest level in a decade.  However talk continues to dominate market commentary that the Federal Reserve have softened their stance and may not raise rates throughout 2019 as they have been hinting at for some time now.  However when the rates decision is announced, the greater significance will be in what its members say rather than what they do.  U.S. President Donald Trump urged the U.S. Federal Reserve not to raise interest rates on Monday. However Fed officials are widely expected to do so this week despite the president’s public effort to dissuade the U.S. central bank from putting any brakes on the economy.  “It is incredible that with a very strong dollar and virtually no inflation, the outside world blowing up around us, Paris is burning and China way down, the Fed is even considering yet another interest rate hike. Take the Victory!”, Trump wrote Monday in a Twitter post.