Overview and Dynamics
The decline in US stock indices after the Fed's decision on September 17 to leave US interest rates unchanged at 0.25%, was stopped yesterday's speech of Fed Chairman Janet Yellen, in which it said that the interest rate rise in the US before the end of the year is possible. Then the Fed will continue to increase "gradual pace", provided improvement in the labor market. Fed must act proactively to prevent speculation on the financial markets. Despite the fact that inflation remains subdued, increased employment growth and the unemployment rate decreased to 5%.
According to yesterday's data, the number of initial claims for unemployment benefits for the week of September 18, increased only 3,000 to 267,000 and, as reported by the US Department of Labor, the data are consistent with the trend of overall improvement in the US labor market.
Reducing the volume of new orders for durable goods and restrained inflation may also be justified by the strengthening dollar, falling oil prices and commodity prices and the weakness of overseas economies.
In the speech, Yellen dollar and the US stock indexes rose in the Asian session. Growth continued until the US session.
Released today in the period from 16:45 to 17:00 (GMT + 3) data on consumer confidence and business activity in the US in September were better than expected (87.2 instead of the 86.7 forecast). The index of personal expenses for the 2nd quarter, which was released a little earlier, and was better than expected (1.9% instead of 1.8% forecast).
However, concerns about slowing economic growth in China cause volatility in global stock and currency markets, reduce confidence in the increase of the rate in the United States. Many investors do not believe in raising rates. Since futures on interest rates Fed only indicate the probability of a rate hike in October, 11%, and the probability of a rate hike in December to 35%.
Recall that the next Fed meeting will be held twice - in October and December of this year. But the focus will be data on the current state of the economy and the labor market in the United States.
Later in the afternoon the dollar began profit-taking, which caused the closure of long positions on the dollar and correction in currency pairs.
Indicators and levels
Earlier this week, the price has broken the bottom line of the triangle at the level of 16400 (Fibonacci correctional level of 38.2%).
Growth stopped strong resistance 16730 (EMA200), 16655 (Fibonacci retracement level of 50%), 16575 (EMA144 on 4-hour chart).
OsMA and Stochastic indicators on the 4-hour and daily charts show a mixed trend.
Today, the DJIA again tested the level of 16400 (Fibonacci correctional level of 38.2%).
However, as the price is below the line EMA200 (16730) and EMA144 (16575) on the h-hour chart, short positions look preferable.
Break of the support level of 16090 (23.6% Fibonacci level) will send the DJIA to recent lows of 15575.
And only the breakdown of the resistance 16575, 16730, with the support of indicators will create prerequisites for the growth to the level of 17400 (EMA200 on the daily chart) and 17750 (August highs), which can be taken as the beginning of a sharp drop in the last month.
Support levels: 16090, 16030
Resistance Levels: 16400, 16575, 16655, 16730
Sell Stop 16300. Stop 16450. Goals 16090, 16030, 15575.
Buy Stop 16480. Stop 16350. Goals 16575, 16655.
Medium-term long positions will be possible after the price fixates above 16750.