On the daily chart below, we can
see that the resistance at the 12274 level held as the
strong NFP report sent the market lower.
Buyers had a hard time in
February as pretty much all economic data beat expectations and made the market
to revise higher future interest rates expectations and price out interest
rates cuts by the end of this year. To sum it up, the soft landing narrative
where inflation returns to target quickly without economic pain got hit hard.
The key support level at 11492 with the 38.2% Fibonacci
retracement level got breached on Friday as the US
PCE report
surprised to the upside on all fronts. This is a bad sign for the buyers and
opens the door for a big move to the 10092 level for the sellers.
On the 4 hour chart below, we can
see more closely how the market opened lower on Friday after the US PCE report
and it may now pull back to retest the broken level before continuing its
bearish trend.
We will have some key leading
economic indicators this
week like the ISM Manufacturing and Non-Manufacturing PMIs. If those beat
expectations, then we should see the selling momentum intensify and possibly
lead to a test of the 11000 level.
On the 1 hour chart below, we can
see the near term picture and the possible spot where the sellers may start to
pile in again. The previous support at 11492 should now act as resistance. For
further confluence we have the downward trendline, the red long period moving
average and the 50% Fibonacci retracement level.
That will be a strong area for
the sellers with defined risk and a high reward potential. The buyers will need
to break through that zone to find some conviction for higher highs, but it
looks unlikely without some key data supporting the move.