The Dow Jones 30 Futures (CME: YM) have experienced a notable downturn this week, with the index futures seeing a decline of just over 1%. If it closes in negative territory, this potential drop could mark back-to-back weeks of losses for the index futures.
Despite reaching a fresh peak two weeks ago, sustaining upward momentum has proven challenging. Last week, various data points revealed signs of weakness, potentially impacting Dow Jones Futures traders. Notably, a rise in jobless claims indicated labour market vulnerabilities, while the ISM Manufacturing PMI for February fell to 47.8, below both expectations and the previous month’s reading. Additionally, factory orders plummeted by 3.6%, surpassing initial forecasts, unveiling further strains in the manufacturing sector.
As the week unfolds, all eyes are on Fed Chair Powell’s upcoming testimony and key labour market data, including Nonfarm Payrolls. These pivotal indicators hold the potential to shape risk sentiment in the forthcoming trading sessions, adding anticipation and uncertainty to market dynamics.
Technical
The current price action of Dow Jones Futures reflects a short-term downtrend despite initially trading within an ascending channel pattern. The breach below its 100-day moving average has heightened bearish sentiment, suggesting a shift in market dynamics.
Initially, bullish momentum found support around the 38400 level, aligning with the lower boundary of the ascending channel. However, overbought conditions signalled by the RSI prompted a temporary pause in the uptrend, leading to a downturn in the index futures. Resistance emerged at the 39345 level, potentially hindering further upside movement.
Notably, the index futures broke below the 61.80% Fibonacci Retracement Golden Ratio, indicating intensified selling pressure. Should downside momentum persist, a retest of the 38400 support level appears likely. Conversely, a resurgence of upside momentum could see the Golden Ratio act as a point of interest for potential upside movement.
Summary
The Dow Jones 30 Futures face downward pressure amidst economic uncertainties, highlighted by weak labour market data and manufacturing indicators. With a breach below the 100-day moving average and key support at 38400, downside momentum may persist, potentially testing support levels.
Sources: Institute for Supply Management, Reuters, TradingView
Piece Written By Nkosilathi Dube, Trive Financial Market Analyst
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