The Fed has decided to pause its tightening cycle at 5.00-5.25% last week because they want to see more economic data before deciding on further rate hike as they are trying to find the right level of monetary restraint needed to bring inflation down to target without too much pain for the economy.
In fact, Fed Chair Powell confirmed yesterday during his testimony to Congress that returning to the 2% inflation target has still a long way to go and that the two more rate hikes pencilled in the Dot Plot was a “pretty good guess” if the economy performs as expected.
Dow Jones Technical Analysis – Daily Timeframe
On the daily chart, we can see that the Dow Jones has probed above the key 34477 resistance following the FOMC decision but eventually gave everything back. At the moment looks like the market is pulling back after a very strong rally since the bounce on the 32684 support.
Dow Jones Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that we have a nice level of support at the previous swing low level at 34085 where we can also find the 38.2% Fibonacci retracement level for confluence. The buyers are likely to lean on that level with a defined risk below it to target again the break above the 34477 resistance. The sellers, on the other hand, will want to see the price breaking lower to pile in even more and extend the pullback to the 50% Fibonacci level.
Dow Jones Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that we have a short term downtrend defined by the moving averages and a trendline. In fact, more conservative buyers may want to wait for the price to break above the trendline and for the moving averages to cross to the upside before piling in for another rally.
The key data to watch next are the US Jobless Claims today and the US PMIs tomorrow.
