Last
week, the Fed hiked the interest rates by
25 bps as widely expected keeping everything unchanged. Fed Chair Powell
reiterated their data dependency and kept all the options on the table. The
economic data since the FOMC meeting has been pretty solid and the labour market
indicators keep on running hot. This week we got a selloff that began with the
rating agency Fitch downgrading US credit
rating to AA+ from AAA and then extended further as the US ADP report
came in hot again.
Dow Jones Technical
Analysis – Daily Timeframe
Dow Jones Daily
On the daily chart, we can see that the Dow Jones
broke above the key 35289 resistance and has
now pulled back to retest it. We can also notice that we have the red 21 moving average near the
resistance turned support for confluence. This is
where the buyers should step in with a defined risk below the level and target
the all-time high.
Dow Jones Technical
Analysis – 4 hour Timeframe
Dow Jones 4 hour
On the 4 hour chart, we can see that we had a divergence with the
MACD that was
signalling a weakening momentum after the breakout and the price eventually
pulled back. This 35289 support will be key as a bounce should lead to a rally
and a break lower to a selloff into the trendline.
Dow Jones Technical
Analysis – 1 hour Timeframe
Dow Jones 1 hour
On the 1 hour chart, we can see that we
have downward trendline defining the current short-term downtrend. If the price
breaks above it and takes out the last lower high at 35498, the buyers will
have the confirmation of the bounce and are likely to pile in more aggressively
to target the all-time high. Aggressive sellers, on the other hand, are likely
to lean on this trendline to position for a break lower.
Upcoming Events
Today, all eyes will be on the US NFP
report. The Fed will see another NFP report before the next meeting so this one
won’t decide what they are going to do but it can change market expectations,
nonetheless. It’s hard to see what the market is going to do with this data,
but a strong report should weigh on the Dow Jones as the market would expect
the Fed to remain hawkish and weak readings are likely to cause a selloff as
the market may start to fear a recession on the horizon. The technicals here
should be more helpful to manage risk and position in line with the flow.