Last week was the Jackson Hole Symposium week and we have heard from many Fed members about their opinions on the momentary policy going forward. There seems to be a consensus for a pause in September as they try to “carefully” assess the lag effects of their tightening to date. Nonetheless, they are ready to do more if conditions require further tightening and in fact, they keep reaffirming their data dependency. The economic data since the last FOMC meeting has been surprising to the upside with the labour market remaining very strong, but the last two inflation reports showed the Core M/M inflation rising by just 0.16%. Overall, it looks like a soft landing scenario but the latest US PMIs showed that there might be pain ahead.
Dow Jones Technical Analysis – Daily Timeframe
On the daily chart, we can see that the Dow Jones broke through a key support zone where we had the upward trendline and the previous swing high level. This has opened the door for much lower prices and the first key support comes at 33805. The bias is now bearish as the price has been printing lower lows and lower highs and the moving averages are crossed to the downside.
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 weakening momentum often followed by pullbacks or reversals. In this case, we might see a pullback into the 38.2% Fibonacci retracement level where we have also the confluence with the previous highs and the support turned resistance. This is where we can expect the sellers to pile in with a defined risk above the level to target the 33805 support. The buyers, on the other hand, will need the price to break above the resistance to switch the bias from bearish to bullish and start targeting a new high.
Dow Jones Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that we have some short term levels where the price has been reacting to multiple times. Although the main level is the one around the 34700 resistance, we might have a short term rally into the resistance if the price breaks above the 34485 level. In fact, we can expect the buyers to pile in with a defined risk below the level to target the resistance and eventually a breakout. The sellers, on the other hand, may want to enter already at this 34485 level and pile in even more aggressively if the price breaks also below the 34315 level.
Upcoming Events
This week is an important one given that we will see many key labour market data, including the US NFP, before the next FOMC meeting. We start tomorrow with the US Consumer Confidence and the US Job Openings. On Wednesday, we have the US ADP report. Moving on to Thursday, we will have the US Jobless Claims and the US PCE data. Finally, we conclude the week with the US NFP and the ISM Manufacturing PMI on Friday. Although the Fed keeps all the options on the table, it’s also leaning more towards a pause in September, so we will need strong data to make the market to expect a hike at the upcoming meeting.
