10:29, 21 February

Moves to 10 Week High Around 26000 after Fed Minutes

Over the last week the US30 index has made a steady climb higher to reach its highest level since early December as it continually creeps upwards. Only a week ago it seemed content to have consolidated in a narrow range right above the significant level of 25,000 before it began its slow climb higher.

A few weeks ago this level offered some resistance to the index however this was quickly broken through, only for the level to prop up the index since, and this level remains key. For the last few months, the two key levels of 24,000 and 25,000 have been playing a role and influencing price action.

In the last six weeks or so, the index has done very well to move back within the range between these two levels, after falling to its lowest levels in 18 months below 21,500. It met some resistance at 24,000 before moving through. December was several weeks the US30 index would rather forget as it fell very sharply down through any support at the 25,000 level and then also through the 24,000 level down to that 18 month low. As expected the 24,000 level did offer some resistance and it will be interesting to see whether this level props up the index should it decline from its current levels.

In late November 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 few months have seen the index moving sharply between 24,000 and 26,000 as the volatility and the swings back and forth intensified before the massive drops in December which was the most volatile the index has been in many years. It will be interesting to see whether the peaks from November and December last year provide some resistance to the index in the near future.

The U.S. central bank has released minutes of its January meeting, with the market watching closely for clues on a variety of matters. Minutes from the January Federal Reserve (Fed) meeting reiterate the central bank's new "patient" policy stance. “Almost all participants thought that it would be desirable to announce before too long a plan to stop reducing the Federal Reserve’s asset holdings later this year,” according to the record of the Federal Open Market Committee’s (FOMC) meeting on 29th – 30th January. Federal Reserve officials widely favoured ending the runoff of the central bank’s balance sheet this year while expressing uncertainty over whether they would raise interest rates again in 2019, minutes of their January meeting showed. “Many participants observed that if uncertainty abated, the Committee would need to reassess the characterization of monetary policy as ‘patient’ and might then use different statement language,” the minutes noted. Referring to the roll off of assets from the balance sheet that began in late 2017, the minutes said, “Such an announcement would provide more certainty about the process for completing the normalization of the size of the Federal Reserve’s balance sheet.” The minutes also elaborated on the dovish message delivered three weeks ago when the FOMC said it will be “patient,” signaling it had put rate hikes on hold and was prepared to be more flexible on shrinking the balance sheet.