12:17, 17 April

Trades at Six Month High Above 26000, as Fed May Sit for a While

The US30 index has done well in the last couple of weeks to steadily move higher and finally push through the resistance at the key 26000 level and move to a six month high. It has now consolidated a little in the last couple of weeks and is now receiving support from this level allowing it to remain above this key level. 
It will be interesting to see if it can maintain the break and potentially start a new range and return to previous highs around 26800.

Throughout February and March the US30 index seemed to have been content to trade in a narrow range roughly between 25400 and 26200, before the recent break. In early February the index 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. 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.

Allianz’s chief economic advisor, Mohamed El-Erian believes that the U.S. Federal Reserve (Fed) has switched from a stance that was “too hawkish” at the end of last year to now “too dovish”.  He also believes that their stance has contributed to greater volatility in financial markets globally.  “I think they went a little too far,” he said.“In the fourth quarter, they certainly were too hawkish ... and now I think they have swung too dovish.”  Meanwhile, Chicago Federal Reserve President Charles Evans has said that he’d be comfortable leaving interest rates steady until later in 2020 to help ensure sustained inflation in the U.S.  “I can see the funds rate being flat and unchanged into the fall of 2020. For me, that’s to help support the inflation outlook and make sure it’s sustainable,” Evans said on CNBC.  For many years the Fed has targeted 2% inflation as a level at which the U.S. economy can grow at a healthy rate.  Mr Evans said, “I had been thinking that inflation was finally going to be solid, hit 2% on a sustained basis; maybe go over a little bit. That was my projection.  And on the strength of that I had, as recently as September and December, thought that maybe a couple rate hikes were in our future.”