Despite revealing worrisome factors such as a higher unemployment rate and lower average weekly hours, the recent release of the NFP data has not significantly impacted the Dow Jones. The labour market has shown resilience, albeit with some looseness, potentially leading to lower inflation without causing severe damage to the economy.
Additionally, the market has not been affected by the underperformance of the ISM Services PMI. On the contrary, the sub-index indicating lower prices paid has fuelled speculation that core inflation could decrease without causing substantial harm.
The market viewed the significant miss in Jobless Claims with caution, considering the impact of seasonal adjustments, while also acknowledging the improvement seen in Continuing Claims. Overall, the market chose to emphasize the positive aspects of the data rather than dwell on the negatives.
Dow Jones Technical Analysis – Daily Timeframe
On the daily chart, we can see that the Dow Jones has rallied strongly as soon as it broke out of the downward trendline. The price stalled at the 33854 swing level resistance, but picked up shortly after breaking above it and extended the rally towards the key resistance zone at 34477. The price looks overstretched now as depicted by the distance with the blue 8 moving average. Generally, the price pulls back into the moving average to find a new equilibrium before the next move.
Dow Jones Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that we have a divergence with the MACD, which is generally a sign of a weakening momentum often followed by pullbacks or reversals. Given that we are near the key resistance zone, this divergence may be significant. If we do get a pullback, the best support zone is at the 33854 level where we can find the confluence with the 50% Fibonacci retracement level and the red 21 moving average.
Dow Jones Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see more closely the short-term price action with the strong support level at 33854 highlighted with the blue area. From a risk management perspective, this is the best place where the buyers can re-enter the market with a defined risk just below the zone and target the 34477 resistance first and a breakout afterwards. The sellers, on the other hand, can lean only on the 34477 resistance or wait for the price to break below the 33854 support to target the 33450 swing low first and the 32684 support afterwards.
The Dow Jones is in for a week filled with important events. It all begins with the highly anticipated US CPI report scheduled for tomorrow. This report is expected to play a crucial role in shaping the market's expectations for the upcoming FOMC rate decision, which is set to take place the following day. Furthermore, later in the week, there will be another Jobless Claims report and the release of the University of Michigan consumer sentiment survey. The previous release of this survey had a significant impact on the market, primarily due to a substantial increase in long-term inflation expectations.
