Yesterday, the Fed hiked interest rates by 25 bps bringing the FFR to 5.25-5.50% as widely expected. The policy statement was left basically 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 we see weakness.
Dow Jones Technical Analysis – Daily Timeframe
On the daily chart, we can see that the Dow Jones has eventually broke above the key resistance at 35289 and it’s now just 3% away from the all-time high. That’s incredible given that it’s happening after the Fed hiked by 500 bps in a year. Nevertheless, the job for the buyers may now be harder as at first signs of recession the market may selloff pretty fast. But as long as the data keep on supporting the soft-landing scenario, we are likely to see more highs.
Dow Jones Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that the price is struggling to sustain the breakout of the key resistance. In fact, we can notice a divergence with the MACD, which is generally a sign of weakening momentum often followed by pullbacks or reversals. In this case, the broken resistance turned support should be a good level where the buyers can lean on as there’s also the 38.2% Fibonacci retracement level for confluence.
Dow Jones Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that the price action is forming a rising wedge pattern, which might be another confirmation that we are about to see a pullback. The buyers will be waiting at the 35289 support with a defined risk below the level and target the all-time high. The sellers, on the other hand, will want to see the price breaking below the support level to pile in and target the support near the 34800 level and eventually a big selloff into the lows.
Upcoming Events
Today the main event will be the US Jobless Claims as the Fed and the market remain focused on the labour market performance. Data in line with expectations is unlikely to cause big movements, but numbers that deviate notably from the forecasts are likely to be market moving. If we see a big beat, the Dow Jones is likely to rally again and probably hit the all-time high. On the other hand, if the data misses expectations by a big margin, we should see the market falling as some recessionary fears should cloud the risk sentiment. Tomorrow, it will be the time for the latest US PCE and ECI reports with the market likely to focus more on the wages data as higher wages could lead to another inflationary wave.
