The S&P500 Futures (CME: ES) trading activity has subsided as traders wait on the sidelines in anticipation of the U.S. Inflation Data and Labour Market Reports.
A late recovery in the prior week only led the index to recover half of the week’s losses imposed by recessionary fears. According to the CME FedWatch Tool, traders anticipate a pause in rate hikes in the upcoming Federal Reserve meeting and an ease as soon as July, and if realised, the S&P500 Futures could gain on less aggressive borrowing costs.
After rejecting support at the 4070.00 level, The S&P500 Futures was redirected toward the 61.80% Fibonacci Retracement Golden Ratio. The index found resistance at the Golden Ratio, which falls just below resistance at the 4197.50 level. Volumes subsided as price approached the Golden Ratio, and a narrow descending channel pattern was established ahead of the U.S. Inflation reading.
If inflation comes in higher with some surprise factor, the index will likely lose out to higher interest rate expectations and leave the 4070.00 level probable. A high volume breakout below the descending channel pattern could validate a leg down.
In contrast, bullish traders could find some vigour on the back of a weaker inflation reading, prompting a pause in rate hikes. They will likely approach the 4197.50 level if a high volume breakout above the descending channel pattern plays out.
Traders will likely have their finger on the trigger at the release of the U.S. Inflation data, causing increased volatility for the index. However, the Labour Market reports due on Thursday pose another opportunity or threat for traders as they determine whether the data poses enough of a recessionary threat or if another interest rate hike is imminent.
Sources: CME FedWatch Tool, Reuters, TradingView