Last week, the NFP missed expectations for a second time in a row and the previous numbers were all revised lower. This was seen as a disappointment as the labour market seems to be a touch weaker than previously expected. Nonetheless, the unemployment rate fell once again and lessened the disappointment from the miss in the payrolls number. The worse part for the Fed is that the average hourly earnings beat expectations, and such high wage growth is not consistent with a sustainable return to the 2% target. It’s worth reminding though, that the Fed will see another NFP report before the September meeting, so this NFP doesn’t change much, but the data leading into the meeting can still weigh on sentiment.

Dow Jones Technical Analysis – Daily Timeframe

Dow Jones Technical Analysis
Dow Jones Daily

On the daily chart, we can see that the Dow Jones has failed to sustain the breakout above the key 35289 resistance and fell below the level. The buyers are stepping in at the red 21 moving average to position for another rally, but the risk of a bigger pullback into the trendline has now increased.

Dow Jones Technical Analysis – 4 hour Timeframe

Dow Jones Technical Analysis
Dow Jones 4 hour

On the 4 hour chart, we can see that after a brief rally from the resistance turned support, the sellers stepped in at the red 21 moving average to target a break below the 35289 support. Now that the price is below the level, we might see a retest and another selloff into the trendline where we can find the 50% and the 61.8% Fibonacci retracement levels for confluence. A break below that trendline would open the door for a much deeper selloff.

Dow Jones Technical Analysis – 1 hour Timeframe

Dow Jones Technical Analysis
Dow Jones 1 hour

On the 1 hour chart, we can see that the 35289 support may now act as resistance on a retest of the breakout. We can also see that we have the 38.2% Fibonacci retracement level and the red 21 moving average for confluence. This is where the sellers should pile in even more for a fall into the trendline. The buyers, on the other hand, will want to see the price breaking above this short-term resistance to extend the rally into the previous swing high at 35600.

Upcoming Events

This week the main event will be the US CPI report on Thursday. The market has been loving the disinflationary trend seen in the past months, so an upside surprise is likely to weigh on risk sentiment and push the market lower. On the other hand, another miss in the data should provide some relief and lead to a rally. After the US CPI we will also see the latest US Jobless Claims report, which is less likely to move the market since it’s released at the same time of the CPI, but big surprises should have an effect, nonetheless. Finally, we conclude the week with the University of Michigan Consumer Sentiment report on Friday where the market is likely to focus more on the inflation expectations figures.