09:39, 21 March

Easing Below 26000 Level as Fed Officially Announces Rates Plan for 2019

The US30 index has eased in the last day or so, after spending the previous week rallying well. The previous two weeks saw the index ease from a three month high around 26200, which has now resulted in the US30 index trading in a narrow range roughly between 25400 and 26200 for the last month. In early February the index seemed content to have consolidated in a narrow range right above the significant level of 25,000 before it began its slow climb higher. 
It was able to resume what has become a very steady climb higher which started back in December. At the end of January, the 25000 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 couple of months, 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 is likely this level will prop 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 soon.

In a recent interview on CBS News’ 60 Minutes, U.S. Federal Reserve (Fed) Chairman Jerome Powell said that interest rates can remain on hold as the central bank waits to see how conditions evolve, indicating that there’s no clear time limit to the Fed’s current pause.  Now after their two day Federal Open Market Committee (FOMC) meeting, that plan has now been officially stated as there will be no more rate rises in 2019.  On Wednesday, the Fed held interest rates steady and its policymakers abandoned projections for further rate hikes this year as the U.S. central bank flagged an expected slowdown in the economy.  In a unanimous move that aligned with market expectations, the FOMC made a sharp dovish turn from policy projections just three months earlier.  Many analysts believe the Fed actually exceeded the markets’ dovish expectations with its about-face on policy, and this in turn impacted the US dollar sending it strongly lower against the major currencies.  “Growth of economic activity has slowed from its solid rate in the fourth quarter,” the Fed said in a policy statement that kept its benchmark overnight lending rate, in a range of 2.25 – 2.5%.  “Recent indicators point to slower growth of household spending and business fixed investment in the first quarter ... overall inflation has declined.”