The S&P500 Futures (CME: ES) closed a tumultuous session on Wednesday, marked by a 40-basis point decline following the Federal Reserve’s decision to maintain interest rates at a 23-year high, hovering between 5.25% and 5.5%. However, the index futures recovered yesterday’s losses in the London session with a 61-basis point gain.
Fed Chair Jerome Powell’s remarks added to the market’s unease, suggesting a prolonged timeline for the central bank to gain confidence in inflation’s trajectory toward its 2% target. Powell’s commentary, however, tempered fears of potential rate hikes as a means to rein in inflationary pressures.
As investors digest these developments, all eyes are now on the upcoming U.S. Nonfarm Payrolls report. With the labour market widely regarded as a linchpin of inflation dynamics, this data point assumes critical importance in gauging the trajectory of inflationary pressures.
Technicals
The S&P500 Futures recently faced downward pressures, trading below the 100-day moving average, signalling a short-term downtrend. However, a shift occurred as buyers entered the scene, leading to a breakout from a descending channel pattern that previously delineated the downtrend. This breakout coincided with the index futures converging with the 100-day moving average, indicating potential reversal dynamics.
Buyers found support at the 4963.50 level, propelling the price towards the 100-day moving average. Yet, the moving average acted as resistance at 5154.25, hindering further upward momentum and paving the way for renewed downward pressures. Consequently, a downturn ensued, with the index futures retracing towards the 61.80% Fibonacci Retracement Golden Ratio.
Notably, oversold RSI conditions emerged at the Golden Ratio, suggesting a potential intermediate support level. If buyers regain interest, the index futures may retest the 5154.25 resistance level. Conversely, a breakthrough below the Golden Ratio, particularly on high volume, could signify further downside potential, making the 4963.50 support level a likely target.
Summary
In conclusion, the S&P500 Futures face volatility amidst Fed decisions and technical indicators. Buyers’ interest at 4963.50 and resistance at 5154.25 highlight key levels to watch. A breakout above resistance or below support could dictate the future market direction, emphasizing the importance of monitoring both fundamental and technical factors.
Sources: Federal Reserve, Reuters, TradingView
Piece Written By Nkosilathi Dube, Trive Financial Market Analyst
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