Yesterday, the US CPI report came basically in line with expectations as the market was already expecting higher energy prices to push up the August inflation readings. The Core measure, which is what the Fed is focused on, was in line with forecasts with the monthly figure just a touch higher than expected. The core 3-month annualised rate is now 2.4%, which is a good indicator for the Fed that their policy is working well. Now, the question is whether the labour market softens enough to bring inflation sustainably back to target without a recession. And this is something that never happened in history.
Dow Jones Technical Analysis – Daily Timeframe
On the daily chart, we can see that the Dow Jones recently bounced on the key trendline where we had also the confluence with the 50% Fibonacci retracement level, and rallied back into the resistance at 35000. The price then fell again and started to chop around as the market remains uncertain on what’s next.
Dow Jones Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that the price action formed a symmetrical triangle and we are just waiting for a breakout to decide where to go next. In fact, when the price breaks out on either side of the pattern, we can generally see momentum picking up and the price moving in the direction of the breakout in a sustained way. So, this is now a game of patience.
Dow Jones Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see more closely the price action within the triangle with the latest rejection from the upper bound of the pattern. When the price starts to consolidate within such patterns, there are no clear support and resistance levels as the price does not respect them. The best strategy here is to wait for a breakout support by a fundamental catalyst and then join the move.
Upcoming Events
Today is likely to be a volatile one given that we are going to see lots of top tier economic indicators released at the same time. In order of importance, we will get the US Jobless Claims, Retail Sales and PPI data. The September FOMC meeting is already a done deal as the market is pricing a 97% probability of a pause, so the data is going to influence the November and December expectations. Tomorrow, we conclude the week with the University of Michigan Consumer Sentiment report.
