Fed aggression likely to strengthen US30’s retracement resistance

  • US30
    (${instrument.percentChange}%)

The DJIA is in a precarious position. Below is FXCM's US30 CFD on a weekly scale, which suggests a strong resistance at the previous impulse's 61.8% Fibonacci retracement (blue arrows). The RSI and stochastic are at neutral levels (black ellipses), with neither a bullish nor bearish momentum. Yesterday, we suggested that the 10-year yield is overbought and is due to moderate, which should support stocks in the near term.

As a part of an IMF panel, Fed Chair Powell said yesterday that it "is appropriate in my view to be moving a little more quickly". He added that there is a case for "front-end loading any accommodation one thinks appropriate...50 basis points will be on the table for the May meeting." These comments pushed rates even higher, adversely affecting the US30. We still think that yields are due to moderate in the near term. However, given the hawkishness and aggressiveness of the Fed, in the medium- to longer-term, the 61.8% Fibonacci level may prove to be formidable.

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Russell Shor

Senior Market Specialist

Russell Shor joined FXCM in October 2017 as a Senior Market Specialist. He is a certified FMVA® and has an Honours Degree in Economics from the University of South Africa. Russell is a full member of the Society of Technical Analysts in the United Kingdom. With over 20 years of financial markets experience, his analysis is of a high standard and quality.

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