11:30, 26 June

Daily analysis

In the last few days the US30 index has consolidated a little before easing back today however it is the last few weeks that is significant. A few weeks ago the US30 index rallied strongly to return to back above the 25000 level and continue beyond another key level in 26000 to reach a one month high, before consolidating a little and enjoying some support from 26000. It then surged higher again to get very close to its all time high set last year.
Given the significance of the 26000 level, there was little surprise that the index enjoyed some support from this level as it consolidated and it may do so again should the index fall further from its present levels. In the couple of weeks prior to the strong rally, the index had reversed and eased lower again falling to a four month low around 24600. Despite its recent excursion below 25000, this level remained likely to offer some support to the index.

The month of May has seen a strong decline for the index moving from a near all time high around 26700 down to its recent four month low. Throughout April and prior to its decline, the index had done well to steadily move higher and finally push through the resistance at the key 26000 level and move to a six month high above 26600. 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.

The U.S. Federal Reserve Chairman Jerome Powell has warned about mixing central bank activity and political interests in a speech on Tuesday.  His speech came amid intense pressure from U.S. President Trump to cut interest rates.  Attendees at the speech were also paying close attention to any clues about upcoming central bank policy moves.  His remarks were similar from last week’s Federal Open Markets Committee meeting, in that their current policy is under review.  “Since the beginning of the year, we had been taking a patient stance toward assessing the need for any policy change,” he said. “We now state that the Committee will closely monitor the implications of incoming information for the economic outlook and will act as appropriate to sustain the expansion, with a strong labor market and inflation near its symmetric 2 percent objective.  The Fed is insulated from short-term political pressures - what is often referred to as our ‘independence,’” Powell said in prepared remarks. “Congress chose to insulate the Fed this way because it had seen the damage that often arises when policy bends to short-term political interests. Central banks in major democracies around the world have similar independence.”