Last week
was the Jackson Hole Symposium week and we
have heard from many Fed members about their opinions on the momentary policy
going forward. There seems to be a consensus for a pause in September as they
try to “carefully” assess the lag effects of their tightening to date.
Nonetheless, they are ready to do more if conditions require further tightening
and in fact, they keep reaffirming their data dependency. The economic data
since the last FOMC meeting has been surprising to the upside with the labour
market remaining very strong, but the last two inflation reports showed the Core M/M
inflation rising by just 0.16%. Overall, it looks like a soft landing scenario
but the latest US PMIs showed
that there might be pain ahead.
Dow Jones Technical
Analysis – Daily Timeframe
Dow Jones Daily
On the daily chart, we can see that the Dow Jones
broke through a key support zone
where we had the upward trendline and the
previous swing high level. This has opened the door for much lower prices and
the first key support comes at 33805. The bias is now bearish as the price has
been printing lower lows and lower highs and the moving averages are
crossed to the downside.
Dow Jones Technical
Analysis – 4 hour Timeframe
Dow Jones 4 hour
On the 4 hour chart, we can see that we have a divergence with the
MACD which is
generally a sign of weakening momentum often followed by pullbacks or
reversals. In this case, we might see a pullback into the 38.2% Fibonacci retracement level
where we have also the confluence with the
previous highs and the support turned resistance. This is
where we can expect the sellers to pile in with a defined risk above the level
to target the 33805 support. The buyers, on the other hand, will need the price
to break above the resistance to switch the bias from bearish to bullish and
start targeting a new high.
Dow Jones Technical
Analysis – 1 hour Timeframe
Dow Jones 1 hour
On the 1 hour chart, we can see that we
have some short term levels where the price has been reacting to multiple
times. Although the main level is the one around the 34700 resistance, we might
have a short term rally into the resistance if the price breaks above the 34485
level. In fact, we can expect the buyers to pile in with a defined risk below
the level to target the resistance and eventually a breakout. The sellers, on
the other hand, may want to enter already at this 34485 level and pile in even
more aggressively if the price breaks also below the 34315 level.
Upcoming Events
This week is an important one given that we will see
many key labour market data, including the US NFP, before the next FOMC
meeting. We start tomorrow with the US Consumer Confidence and the US Job Openings.
On Wednesday, we have the US ADP report. Moving on to Thursday, we will have
the US Jobless Claims and the US PCE data. Finally, we conclude the week with
the US NFP and the ISM Manufacturing PMI on Friday. Although the Fed keeps all
the options on the table, it’s also leaning more towards a pause in September,
so we will need strong data to make the market to expect a hike at the upcoming
meeting.