The reaction to the FOMC Minutes in the US30 index was to initially rally on the positive tones coming from the Fed. However, as we have seen recently, fears about inflation took hold, sending the price tumbling lower through strong support around 25000.00 and 24876.70. The low created so far is 24589.00. A break lower to the 24500.00 level can still be regarded as constructive for bulls but should this level be breached there is a danger that the higher low formed on the 14th of February at 24312.6 is tested. Moving below this level hands control over to the bears, who will attempt to move price down to 24000.00 and the rising blue trend line. A loss of this trend line would be a deeper correction to test the 2018 lows and the 23000.00 level.
But until then, those holding a bullish view have an opportunity to buy any dip created above 24000.00. The area between the current price level and yesterday’s high contains important levels and moving averages that can become increasingly resistive the longer we stay below them. As we have seen with V-shaped recoveries in the past, the sooner the price retraces the move lower, the less chance there is of previous support levels becoming strong resistance levels. The most immediate level to contest is 24876.70, followed by the 50 and 55-period moving averages around 24963.00. The 100-period MA is located at 25079.00 and the 200-period MA at 25143.00. The falling red trend line comes in at 25240.00, with 25436.00 the next resistance overhead. A break to this area can see bearish positions come under pressure, which would lead towards the area around 26000.00.
The BOE Monetary Policy Committee were in Parliament yesterday for the Inflation Report Hearings. The reaction to this event saw the GBPUSD pair move from 1.39348 to a high for the European session of 1.39898, before slipping back to the start line following US PMI data. With the release of the FOMC Minutes, the pair reached a high of 1.40076 but was unable to sustain this level as the USD strengthened and the pair reached a daily low an hour later at 1.39062. Further selling this morning has seen the 200-period MA broken and price reach 1.38695. The next level of support is found at 1.38354, with 1.37644 below. Should price fail to rally at these levels, there is little in the way of support until 1.36000.
Resistance can be found at the 100-period MA, currently at 1.39667. The Blue resistance trend line, at 1.39830, appears to be part of a bull flag but until this line is tested and broken, price will remain below 1.40000. The Red resistance trend line has been used multiple times now and is located at 1.40910, just below the 1.41000 level. A break above that resistive area can lead to a push for the highs at 1.43450.