Last week, the Federal Reserve made the decision to pause its tightening cycle, settling at a range of 5.00-5.25%. Their rationale behind this move was a desire to gather additional economic data before determining whether or not to proceed with further interest rate hikes, although the pencilled two more rate hikes by the end of 2023. Their goal is to carefully calibrate the appropriate level of monetary restraint required to bring inflation down to the target, while minimizing any adverse effects on the economy. Following the FOMC decision, the Dow Jones rallied, but pulled back a bit going into the long Juneteenth weekend.
Dow Jones Technical Analysis – Daily Timeframe
On the daily chart, we can see that the Dow Jones eventually broke out of the 34477 resistance and extended the rally towards the 34890 level. The price then pulled back on Friday as we headed into the long Juneteenth weekend. There wasn’t any negative catalyst though, so it might keep going up for now. The next big resistance is the 35289 level, and a break above it, would open the door for a rally towards the all-time high at 36832.
Dow Jones Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that we have some confluence at the 34477 resistance turned support. In fact, we can find the red 21 moving average and the upward trendline there. The buyers should lean onto this support area to target a new higher high, while the sellers will want to see the price breaking lower to pile in and extend the pullback into the 34100 level.
Dow Jones Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that we also have the 50% and 61.8% Fibonacci retracement levels that strengthen even more this support zone. From a risk management perspective, the buyers have a low risk below the support with a high reward in case the price rallies towards the 35289 resistance. The sellers, on the other hand, can only wait for a breakout to get more conviction for a deeper pullback into the 34100 level.
This week won’t offer much in terms of data, but it will feature remarks from several Federal Reserve officials, including Fed Chair Powell who will be testifying before Congress on both Wednesday and Thursday. Additionally, we have the release of the Jobless Claims report on Thursday, followed by the US PMIs on Friday.
