Russell 2000 Technical Analysis

The Fed last week
made the decision to pause its tightening cycle, settling at a range of
5.00-5.25%. Their reason was the need for additional economic data before
proceeding with further rate hikes. Their objective is to carefully adjust the
level of monetary restraint necessary to reduce inflation to the 2% target without
inflicting excessive hardship on the economy. The Russell 2000 responded
positively the day after the FOMC decision, rallying, but experienced a slight
retracement just before the extended Juneteenth weekend.

Russell 2000 Technical
Analysis – Daily Timeframe

On the daily chart, we can see that the strong
Russell 2000’s rally since the breakout of the 1723-1820 range, has stalled at
the key 1920 resistance zone. If
the price breaks above the level, it will open the door for a rally towards the
2030 resistance. The sellers are likely to lean on this strong level to target
a pullback into the 1820 resistance turned support, while
the buyers may want to wait for a break higher before piling in with more

Russell 2000 Technical
Analysis – 4 hour Timeframe

On the 4 hour chart, we can see that the last tap
into the 1920 resistance was diverging with the
MACD. This is
generally a sign of weakening momentum often followed by pullbacks or
reversals. In this case, we might see just a pullback as long as the
disinflationary trend continues and the labour market doesn’t weaken too much.

Russell 2000 Technical Analysis
– 1 hour Timeframe

On the 1 hour chart, we can see that from
a risk management perspective, the buyers would be better off to lean on the
support area at 1860 where we can find a previous swing low level and the 38.2%
level of the entire rally into the 1920
resistance. The sellers, on the other hand, will pile in even more aggressively
if the price breaks below that support zone to extend the selloff into the 1820

There’s not much economic
data to be released this week; however, we will hear from various
Fed members, including Fed Chair Powell, who will testify before Congress on
both Wednesday and Thursday. As the week progresses, we will also get the US Jobless
Claims report on Thursday, followed by the US PMIs on Friday.

This article was written by FL Contributors at Source