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US30 - Enjoying Solid Support from 25000 as Recovery Path is ‘extraordinarily uncertain’



US30 - Enjoying Solid Support from 25000 as Recovery Path is extraordinarily uncertain
In the last day or so the US30 index has yet again enjoyed solid support from the key 25000 level allowing it to move back towards another key level at 26000. It has spent the best part of the last few weeks trading between these two key levels being well supported by 25000 but also receiving some resistance from 26000. A few weeks ago, the index fell strongly after having moved strongly higher through the key resistance level at 25000 and 26000 on its way to a three month high above 27000. In the last two months the 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 four weeks.

Should the index decline further, the 25000 level will be expected to continue to offer support, while the 27000 level continues to loom above having placed downward pressure on the index recently and earlier in the year.

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. During its rapid fall, the US30 index completely ignored any possible levels of support on the way lower indicating how strong the move was. Fortunately the index has been able to rally higher in the last two months, consolidate around 22000 before its recent move higher up through resistance at 25000.

In response to the coronavirus pandemic, many countries instituted lockdowns and implemented travel bans to stem the spread of the virus, and now many countries have started to lift restrictions including the United States which has suffered more cases and deaths than anyone else.  There have been nearly 130,000 COVID-19-related deaths reported in the United States, with more than 2.7 million cases, as approximately 40,000 new cases continue to be reported every day. In response to the pandemic, the U.S. Federal Reserve (Fed) has cut its benchmark short-term lending rate to near zero, where Fed Chairman Jerome Powell promised to keep it until the economy recovers.  Mr Powell remains very concerned about the economic outlook, given the number of cases continues to grow.  “Output and employment remain far below their pre-pandemic levels. The path forward for the economy is extraordinarily uncertain and will depend in large part on our success in containing the virus,” Powell said.  “A full recovery is unlikely until people are confident that it is safe to reengage in a broad range of activities,” he added. “The path forward will also depend on the policy actions taken at all levels of government to provide relief and to support the recovery for as long as needed.”

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