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US30 – Drops Sharply Below 28000 as Coronavirus Concerns and Cases Grow

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US30 - Drops Sharply Below 28000 as Coronavirus Concerns and Cases Grow
The US30 index has eased away from the strong resistance at the key 29000 level over the last two weeks however the fall has accelerated in the last two days as it has fallen sharply through the support at the key 28000 level to a four week low. This fall has followed a strong period which saw the US30 index rally very well moving from a six week low to back above the key 28000 level and towards 29000, which offered stiff resistance. The 29000 level also provided resistance to the US30 index in early September, when it was approaching its all time high set earlier in the year, and while it received some support from the other key level of 28000, this has now been broken through strongly.

For the last three months, the US index has moved mainly between support at 27000 and resistance at 29000, and the former level may be expected to offer some support if the index continues to decline. The latest rejection at 29000 reinforces how significant this level has become so it will be interesting to see if the index makes another run to break through. The 28000 level has played a lesser role providing both support and resistance. For a few weeks in July the US30 index met resistance at another key level of 27000 whilst bouncing off support at 26000, which is why the 27000 level is now offering some support to the index.

Throughout June, the index enjoyed solid support from another key level at 25000, while receiving some resistance from 26000 remaining in a range between these levels, up until the break a few weeks ago. Throughout April and May 25000 level had turned away the index on several occasions, reinforcing how significant the 25000 level had become in this period, and it has been able to provide some strong support to the index in the last month or so. Should the index decline further, the 25000 level will be expected to continue to offer support.

Throughout April, the US30 index rallied higher to a one month high near 25000, while the key level of 22500 supported the index. During this period, the US30 index settled right down content to trade right around the 24000 level, with the 25000 level looming above and continuing to offer resistance whenever the index rallied. The US30 index is also likely to receive some support from 22500 should it break back lower through 25000. Since mid-March the US30 index has done very well to regain most of the lost ground, after the significant drop where it moved from all time highs above 29000 down to a three year low near 18000.

With the world now dealing with the coronavirus pandemic for more than seven months, it had become obvious to most that it was not going away any time soon, and it continues to impact everyday life and more importantly the global economy.  Recently, the U.S. Federal Reserve (Fed) maintained its promise to keep interest rates near zero and keep them there until inflation rises consistently, with some individual Fed members indicated interest rates could stay anchored near zero until 2023.Unfortunately, in the last week, coronavirus cases around the world have set new records including in the United States.  So, whilst the central bank is attempting to navigate the country through the pandemic, the country is only going to make it more difficult as the nation is set for a difficult winter.  Dr. Scott Gottlieb, the former U.S. Food and Drug Administration commissioner said, “I think we’re going to bear a lot more infection … and the health-care system is going to have to bear the brunt of this burden, because I don’t think you have the popular will for stay-at-home orders or broad mitigation.”  The increase in cases in several states are leading to more hospitalizations and will ultimately lead to more deaths, White House coronavirus advisor Dr. Anthony Fauci said.



This post was written by Graeme Watkins

CEO Valutrades Limited, Graeme Watkins is an FX and CFD market veteran with more than 10 years experience. Key roles include management, senior systems and controls, sales, project management and operations. Graeme has help significant roles for both brokerages and technology platforms.

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