US 500 – Preparing For Payrolls VolatilityUS 500 IndexPEPPERSTONE:US500PepperstoneYesterday the US 500 index rallied 0.3%, breaking a losing streak that had extended to 3 days immediately following the comments made by Federal Reserve Chair Kevin Warsh from the Jackson Hole on Friday, that were deemed to be more hawkish than many traders had been expecting and positioning for. Interestingly, the 3-day decline held against a potentially important technical level, (more detail in technical section below) with traders seemingly happy to buy the dip while US corporate earnings remain solid and the oil price drops back slightly from 6-week highs. However, despite the rebound in prices from their lows around 7615, trader uncertainty remains regarding the unstable situation in the Middle East, the impact of rising inflation on Fed interest rate policy and the outcome of this Friday’s US Non-farm Payrolls release (1330 BST). All of which has combined to help keep volatility elevated moving towards the weekend. Looking forward to Friday’s US jobs report, while the headline number is often volatile, sentiment and positioning in the US 500 may be influenced by whether the unemployment rate moves above or below its current level of 4.1% and by the relative strength of average hourly earnings. Any deviation from market expectations may impact the decision making of Fed policymakers when they meet on September 16th to decide their next rate move. This could mean the payrolls outcome may have direct implications for the short-term direction of the US 500 back up towards all-time highs at 7817 (August 13th), or perhaps down towards new lows below 7615. Technical Update: Price Weakness Finding Support at 38.2% Fibonacci Retracement Level Having posted a new all‑time high at 7817 (August 13th), the US 500 index has entered a period of price consolidation. This type of activity is often seen after a strong advance, acting as a natural reaction to what were perhaps over‑extended upside conditions. The challenge for traders in this environment may be attempting to determine whether the latest price weakness is, as has been the case previously, a limited downside correction from which fresh strength can reemerge, or if it represents a more meaningful negative sentiment shift that could lead to further deeper declines. For the upcoming sessions into the Friday close it could be useful to identify potential key support and resistance levels that may play an important role in shaping the next directional themes. Potential Support Levels: Recent declines in the US 500 on Tuesday and Wednesday this week have been held by what may be seen as important support at 7615 (38.2% retracement of the July 29th to August 13th upside). This could represent the first key level for traders to focus on over the next 48 hours. Closing breaks below 7615, while not a guarantee of further declines, could trigger a deeper retracement of the price strength developing from the July 29th low. Breaks of 7615 could open scope toward 7534 (50% Fibonacci retracement), and possibly then 7492, (deeper 61.8% level). Potential Resistance Levels: While support at 7615 (38% retracement) remains intact on a closing basis, fresh attempts to push back towards the upside could emerge. In this scenario, the focus for traders may be on potential resistance at 7708 (Bollinger mid‑average). Closing breaks above 7708 could lead to further price strength to challenge the August 28th high at 7771 and, if this level were also to give way, back to 7817 (August 13th high). The material provided here has not been prepared accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Whilst it is not subject to any prohibition on dealing ahead of the dissemination of investment research, we will not seek to take any advantage before providing it to our clients. Pepperstone doesn’t represent that the material provided here is accurate, current or complete, and therefore shouldn’t be relied upon as such. The information, whether from a third party or not, isn’t to be considered as a recommendation; or an offer to buy or sell; or the solicitation of an offer to buy or sell any security, financial product or instrument; or to participate in any particular trading strategy. It does not take into account readers’ financial situation or investment objectives. We advise any readers of this content to seek their own advice. Without the approval of Pepperstone, reproduction or redistribution of this information isn’t permitted.