Last
week, the NFP missed
expectations for a second time in a row and the previous numbers were all
revised lower. This was seen as a disappointment as the labour market seems to
be a touch weaker than previously expected. Nonetheless, the unemployment rate
fell once again and lessened the disappointment from the miss in the payrolls
number. The worse part for the Fed is that the average hourly earnings beat
expectations, and such high wage growth is not consistent with a sustainable
return to the 2% target. It’s worth reminding though, that the Fed will see
another NFP report before the September meeting, so this NFP doesn’t change
much, but the data leading into the meeting can still weigh on sentiment.
Dow Jones Technical
Analysis – Daily Timeframe
Dow Jones Daily
On the daily chart, we can see that the Dow Jones has
failed to sustain the breakout above the key 35289 resistance and fell
below the level. The buyers are stepping in at the red 21 moving average to
position for another rally, but the risk of a bigger pullback into the trendline has now
increased.
Dow Jones Technical
Analysis – 4 hour Timeframe
Dow Jones 4 hour
On the 4 hour chart, we can see that after a brief
rally from the resistance turned support, the
sellers stepped in at the red 21 moving average to target a break below the
35289 support. Now that the price is below the level, we might see a retest and
another selloff into the trendline where we can find the 50% and the 61.8% Fibonacci retracement levels
for confluence. A break
below that trendline would open the door for a much deeper selloff.
Dow Jones Technical
Analysis – 1 hour Timeframe
Dow Jones 1 hour
On the 1 hour chart, we can see that the
35289 support may now act as resistance on a retest of the breakout. We can
also see that we have the 38.2% Fibonacci retracement level and the red 21
moving average for confluence. This is where the sellers should pile in even
more for a fall into the trendline. The buyers, on the other hand, will want to
see the price breaking above this short-term resistance to extend the rally
into the previous swing high at 35600.
Upcoming Events
This week the
main event will be the US CPI report on Thursday. The market has been loving
the disinflationary trend seen in the past months, so an upside surprise is
likely to weigh on risk sentiment and push the market lower. On the other hand,
another miss in the data should provide some relief and lead to a rally. After
the US CPI we will also see the latest US Jobless Claims report, which is less
likely to move the market since it’s released at the same time of the CPI, but
big surprises should have an effect, nonetheless. Finally, we conclude the week
with the University of Michigan Consumer Sentiment report on Friday where the
market is likely to focus more on the inflation expectations figures.