Last week, the Fed hiked the interest rates by 25 bps as widely expected keeping everything unchanged. Fed Chair Powell reiterated their data dependency and kept all the options on the table. The economic data since the FOMC meeting has been pretty solid and the labour market indicators keep on running hot. This week we got a selloff that began with the rating agency Fitch downgrading US credit rating to AA+ from AAA and then extended further as the US ADP report came in hot again.
Dow Jones Technical Analysis – Daily Timeframe
On the daily chart, we can see that the Dow Jones broke above the key 35289 resistance and has now pulled back to retest it. We can also notice that we have the red 21 moving average near the resistance turned support for confluence. This is where the buyers should step in with a defined risk below the level and target the all-time high.
Dow Jones Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that we had a divergence with the MACD that was signalling a weakening momentum after the breakout and the price eventually pulled back. This 35289 support will be key as a bounce should lead to a rally and a break lower to a selloff into the trendline.
Dow Jones Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that we have downward trendline defining the current short-term downtrend. If the price breaks above it and takes out the last lower high at 35498, the buyers will have the confirmation of the bounce and are likely to pile in more aggressively to target the all-time high. Aggressive sellers, on the other hand, are likely to lean on this trendline to position for a break lower.
Upcoming Events
Today, all eyes will be on the US NFP report. The Fed will see another NFP report before the next meeting so this one won’t decide what they are going to do but it can change market expectations, nonetheless. It’s hard to see what the market is going to do with this data, but a strong report should weigh on the Dow Jones as the market would expect the Fed to remain hawkish and weak readings are likely to cause a selloff as the market may start to fear a recession on the horizon. The technicals here should be more helpful to manage risk and position in line with the flow.