US indices booked the third straight session of declines yesterday as post-Powell pressure continues to linger over Wall Street. The US central bank is committed to fighting inflation and numerous Fed members see the need for more big rate hikes, like 75 basis points. This is also a view of the market with money market derivatives pricing in a 70% chance of 75 basis point rate hike at September meeting. However, a significant deterioration in jobs data could make the Fed rethink the need for such big rate hikes going forward. NFP report for August that will be released on Friday, 1:30 pm BST will therefore be closely watched. However, today's ADP release (1:15 pm BST) will also draw attention as it will be a final hint ahead of official jobs data on Friday.
Taking a look at Russell 2000 (US2000) chart at D1 interval, we can see that the recent upward move on the index was halted slightly ahead of the resistance zone marked with 50% retracement of the downward move launched in November 2021 (orange circle). Subsequent pullback pushed the index back below 38.2% retracement and towards 1,835 pts support zone, marked with 23.6% retracement and 50-session moving average (green line). Downward momentum eased and the index is even trading slightly higher today but a lot may change following jobs data release, especially small caps tend to be more reactive than large caps to changes in the outlook for the monetary policy.
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Source: xStation5
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