Russell 2000 Technical Analysis

Last Friday, the Russell 2000 extended the pullback
from the highs reached after a strong rally triggered by the FOMC decision. This
might have been just a profit-taking move from overstretched levels as nothing
has changed in the data as we got strong US Jobless Claims figures
and good US PMIs. Looking
ahead, we are approaching a new month where we get the key economic data
including the US CPI. The path of least resistance though remains to the upside
until the labour market cracks or the reacceleration in inflation gets
confirmed and we get some hawkish repricing in interest rates expectations.

Russell 2000 Technical
Analysis – Daily Timeframe

On the daily chart, we can see that the Russell
2000 pulled back from the cycle high following a strong rally triggered by the
FOMC decision. We can notice that the price continues to diverge with the
MACD, which
is generally a sign of weakening momentum often followed by pullbacks or
reversals. This is something to keep an eye on as a break below the key 2020 support zone
would confirm the reversal and possibly take us back to the 1920 support.

Russell 2000 Technical
Analysis – 4 hour Timeframe

On the 4 hour chart, we can see that the price got
overstretched recently as depicted by the distance from the blue 8 moving average. In such
instances, we can generally see a pullback into the moving average or some
consolidation before the next move. In this case, we got the pullback, so we
can expect the buyers to start looking for a dip-buying opportunity.

Russell 2000 Technical
Analysis – 1 hour Timeframe

On the 1 hour chart, we can see that besides
the 4-hour 8 moving average, we can also find the confluence with
the trendline, the
50% Fibonacci
retracement level and the red 21 moving average. This
is where the buyers are likely to step in with a defined risk below the
trendline to position for a rally into a new cycle high. The sellers, on the
other hand, will want to see the price breaking lower to invalidate the bullish
setup and position for a drop back into the 2020 support.

Upcoming
Events

This week is going to be shortened by the US Holiday on
Friday. Tomorrow, we have the US Durable Goods and Consumer Confidence reports.
On Wednesday we have Fed’s Waller speaking. On Thursday, we get the latest US
Jobless Claims figures, while on Friday we conclude with the US PCE report and
Fed Chair Powell.

This article was written by FL Contributors at www.forexlive.com.