Last week, the risk sentiment started on a positive note at the beginning of the week due to the lack of a ground offensive in Gaza. Unfortunately, things went south from Wednesday onwards as Israeli PM Netanyahu delivered a speech where he said that they were preparing for a ground invasion.
Moreover, the US Jobless Claims data on Thursday showed another big miss in Continuing Claims, which might be an indication that the labour market is weakening. On Friday, the risk sentiment deteriorated further as market participants likely didn't want to hold long positions into the weekend, especially after early reports of the start of the invasion.
Over the weekend we got reports of a ground offensive being indeed underway. We will see how things will evolve during the week, but the market will also have lots of important economic data to digest.
Dow Jones Technical Analysis – Daily Timeframe
On the daily chart, we can see that the Dow Jones last Friday broke the key 32597 level as the market leant on the defensive side into the weekend. The selloff has got a bit overstretched as depicted by the price distance from the blue 8 moving average. In such instances, we can generally see a pullback into the moving average or some consolidation before the next move.
Dow Jones Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that the latest leg lower is diverging with the MACD right after the breakout. This is generally a sign of weakening momentum often followed by pullbacks or reversals. In this case, we might see a pullback into the minor trendline where we can also find the Fibonacci retracement levels for confluence.
This is where the sellers are likely to step in with a defined risk above the trendline and target new lower lows. The buyers, on the other hand, will want to see the price breaking above the trendline to pile in and position for a rally into the major trendline around the 33300 level.
Dow Jones Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see more closely the bearish setup around the minor trendline and we can also notice that on this timeframe we also have the red 21 moving average adding an extra layer of confluence. This will be a key spot to watch out for as a rejection is likely to lead to new lows while a break should trigger a rally towards the 33300 level.
Upcoming Events
This week, we will get lots of tier one data points with the US labour market and the FOMC decision in focus. Tomorrow, we have the US Employment Cost Index and the Consumer Confidence report. On Wednesday, it will be the time for the US ADP, the ISM Manufacturing PMI and the FOMC rate decision. On Thursday we will get the US Jobless Claims data, while on Friday we conclude the week with the US NFP report and the ISM Services PMI.
