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US30 - Moves to One Month High above 26900 as Fed Needs to Act Fast



US30 - Moves to One Month High above 26900 as Fed Needs to Act Fast
For the last week the US30 index has moved well moving through to a one month high above 26900 which has seen it break out of its recent trading range. For the last month the US30 Index has traded back and forth around the key 26000 level as its volatility has doubled in that period. During that time 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 a month ago.

It was also meeting resistance around 26400, however this has now been broken and this level may offer some support should it decline in the next few days.

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 and it now finds itself moving higher on the back of that support. 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.

St. Louis Federal Reserve (Fed) President James Bullard has been outspoken this week about what he believes the Fed should do to align itself with market expectations.  He believes the Fed should cut interest rates by 50 basis points in two weeks time at its next meeting as the market is expecting it.  In July, the Fed reduced borrowing costs by a quarter point, its first rate cut since 2008.It is rare for central bank officials to admit that financial markets should dictate policy, however “in this situation I would respect the market signal,” Bullard said. “We should have a robust debate about moving 50 basis points at this meeting ... It’d be better in my mind to go ahead and get realigned right now,” rather than moving only a quarter point in September and again in October.“Why do that? Why not just get to the right point today?”, he added.  Recent economic data showed the U.S. manufacturing sector had contracted for the first time in three years amid slowing global economic growth and as the United States and China continue with adding tariffs.

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