This week, the conversation in financial circles has been dominated by tariffs. The week kicked off with a steep drop on Monday, following President Trump’s weekend decision to enforce tariffs on Canada, Mexico, and China.
However, in a move we’ve seen before with previous tariff announcements, the market slowly started to rally back, anticipating that negotiations might lead to a compromise. This optimism paid off as news broke later on Monday that tariffs on Mexico would be on hold for 30 days pending positive talks.
This development spurred an immediate rebound in the markets, with bullish investors growing more confident. The situation with China remains unresolved, yet China’s relatively calm response so far has kept market spirits high.
Attention is now shifting to tomorrow’s U.S. Non-Farm Payroll (NFP) report. January’s labor market data has shown strength, pointing towards a promising NFP outcome. For now, inflation remains a key focus for the Federal Reserve, and regardless of a strong NFP report, it seems likely they will maintain their policy, with two rate cuts anticipated by year-end.
Now, let’s take a closer look at the Russell 2000’s technical performance.
Starting with the daily chart, we saw the Russell 2000 open with a downward gap. Buyers quickly entered near the trendline, aiming to reverse the decline and push towards new highs. The price is hovering near the 2337 resistance level, where sellers might try to assert some control, protecting themselves by positioning for a potential dip back to the trendline. Conversely, buyers will be watching for a break beyond this point to bolster their confidence in a potential new peak.
Moving to the 4-hour chart, there isn’t much change in strategy. Sellers are poised for a potential pullback to the major trendline, while buyers eye a breakout above the current resistance. Should a pullback occur, the first major support is anticipated around the 2290 mark.
On the 1-hour chart, we’re witnessing a minor upward trendline that is presently driving bullish momentum. Buyers are likely to rely on this trendline to propel prices higher, while sellers are waiting for a breakthrough beneath this level to gain conviction for a retreat to 2290. The day’s average price range is delineated with red lines.
Looking ahead, today’s market will be gauging the latest U.S. Jobless Claims figures, setting the stage for the much-anticipated U.S. NFP report to wrap up the week.
