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US30 - Eases from Highs above 30000 as Fed Has Differing Views on Recovery



US30 - Eases from Highs above 30000 as Fed Has Differing Views on Recovery
In the last 24 hours the US30 index has eased away from new highs above 30000 after making another run at the 30000 level. In the last week, it has rested on and enjoyed support from the key 29000 level after having made its first run towards 30000 a week ago and in doing so, smashing through resistance at the key 29000 level, which has applied downward pressure on the index for some time now. In that initial surge higher, it also pushed strongly through 27000 and 28000 which have play a significant role in the price action of the US30 in the last few months. Having supported prices for the last week, the 29000 will be expected to continue to prop up the index. Prior to the surge, it had enjoyed strong support from 26000 which its most recent fall from the resistance at 29000, which allowed the index some support to rally back higher again.

The 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 again. 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 now it has finally broken through with an increase in volatility. For the last three months, the US index has moved mainly between support at 27000 and resistance at 29000 and with the repeated attempts to break through 29000 being thwarted, it demonstrates how significant the most recent break through is. 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.

Two weeks ago, the U.S. Federal Reserve (Fed) kept interest rates near zero and made comments about the U.S. economy still falling short of its pre-coronavirus levels.  The decision to keep its benchmark interest rate anchored in a range between 0%-0.25% was widely expected, and this is where rates have sat since their emergency rate cut seven months ago in the early days of the coronavirus pandemic.  Now the central bank is dealing with vastly different views on how the United States will achieve economic recovery.  For example, St Louis Fed President James Bullard, he believes the country must adopt a measures that health officials have urged since March, including wearing masks, if the economy is going to recover and to keep a control on the current surge in coronavirus cases.  Minneapolis Fed President Neel Kashkari has called for a four-to-six week national lockdown to curb the spread of the coronavirus.  New York Fed President John Williams believes a full economic recovery will have to wait for a vaccine, with the health crisis putting a “question mark” on the economy until then.

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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.