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US30 - Drops Towards 26000 Again as OECD Slashes Forecast



US30 - Drops Towards 26000 Again as OECD Slashes Forecast
In the last 24 hours the US30 index has reversed and headed back towards the current key level of 26000 where it recently enjoyed support from after reaching a four week low. It had been content to spend some time consolidating around the key 27000 level, after moving well to a one month high above this level which saw it break out of its recent trading range down at 26000. The 27000 level is likely to continue to offer resistance should the index rally. Throughout August the US30 Index traded back and forth around the key 26000 level and this range is now playing a role again supporting the index.

During the previous range trading, it found support at 25200 and this level was established after it suffered its largest falls this year dropping sharply from near its all time highs down to its lowest levels in two months near 25000 several weeks ago. Not far away is the all time highs which it achieved in July and this level may provide some resistance if it reverses and rallies again.

In the first week of July, the index consolidated a little in a narrow range roughly between 26500 and 26900, and it used that period of consolidating to great effect pushing higher to the new highs. The consolidation is also of little surprise after its price action over the few weeks beforehand. In early June the US30 index rallied strongly to return to back above the 25000 level and continue beyond another key level in 26000 to reach a then one month high, before consolidating a little and enjoying some support from 26000.

Given the significance of the 26000 level, there was little surprise that the index enjoyed some support from this level as it consolidated. Despite its excursion below 25000 in late May, this level remained likely to offer some support to the index. The month of May saw a strong decline for the index moving from a near all time high around 26700 down to its recent four month low.

The Organization for Economic Cooperation and Development (OECD) has expressed their concerns about the global economy as they believe the trade war between China and the United States has pushed global growth to its lowest levels in a decade.  They have stressed that if governments continue to linger and delay coming to a resolution on trade wars, the global economy risks entering a new, long term low-growth stage.  The OECD said that the global economy will slow from 3.6% growth last year to 2.9% this year before a predicted 3% in 2020, which will be its weakest growth since the 2008-2009 financial crisis.  “What looked like temporary trade tensions are turning into a long-lasting new state of trade relationships,” OECD chief economist Laurence Boone said in an interview.  “The global order that regulated trade is gone and we are in a new era of less certain, more bilateral and sometimes assertive trade relations,” she added.  The OECD also expressed concerns over the looming Brexit deadline and what impact it may have on the United Kingdom and the Eurozone.  The OECD forecasts that if the UK leaves without a deal, its economy will be 2% lower than otherwise in 2020-2021 even if its exit is relatively smooth with fully operational infrastructure in place.

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