Last week, the Fed hiked interest rates by 25 bps bringing the FFR to 5.25-5.50% as widely expected. The policy statement was left unchanged, so the market couldn’t get any signal for the next moves. In fact, the focus was not on the decision itself, but on the forward guidance. Fed Chair Powell in his press conference repeated the message that they are data dependent and that all options are on the table, which means that they could either hike in September if the data remains strong or pause if they see weakness. The data following the FOMC meeting has been supporting the soft-landing narrative with US Jobless Claims beating expectations and the US PCE and Employment Cost Index missing the forecasts.
Dow Jones Technical Analysis – Daily Timeframe
On the daily chart, we can see that the Dow Jones has recently broke out of the key 32289 resistance and it’s now targeting the all-time high, which is less than 3% away. We are seeing some consolidation above the resistance as the market is taking a breather after a record winning streak.
Dow Jones Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that we had a divergence with the MACD which is generally a sign of weakening momentum often followed by pullbacks or reversals. In this case, we got a pullback into the previous resistance now turned support where we had also the 38.2% Fibonacci retracement level for confluence. The buyers stepped in with a defined risk below the support to target the all-time high.
Dow Jones Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that the bullish momentum is still pretty strong and we should see more buyers piling in if the price breaks above the recent lower high at 35700. The sellers, on the other hand, might try to step in at the lower high with a defined risk above the high in anticipation of this whole breakout failing and leading to a selloff. More conservative sellers may want to wait for the price to first fall below the 35289 support before piling in and target new lows.
Upcoming Events
This week is packed with many top tier economic indicators. We begin tomorrow with the US ISM Manufacturing PMI and the US Job Openings. On Wednesday, we will see the US ADP report. Moving on to Thursday, the market will be focused on the US Jobless Claims and the US ISM Services PMI. Finally on Friday, we conclude the week with the main event: the US NFP report.
