The Dow Jones Index futures (CBOT: YM) face a turbulent market and are on course for a fourth consecutive session of losses on Thursday as shifting economic indicators and Federal Reserve sentiments continue to influence the market ahead of the US jobs data.
Recent sessions have seen the Dow struggle amid concerns over economic cooling. Weak labour market data, including lower-than-expected job additions and declining labour costs, has prompted expectations of a potential shift in Federal Reserve policy towards rate cuts as early as March.
Market sentiment is affected by data revealing a slowing US economy, notably evident in subdued private payroll growth. This, coupled with comments from Fed officials signalling a potential end to rate hikes, has stirred anticipation of future rate cuts. Heightened expectations of rate cuts not only exist in the US but also globally, with markets pricing in the possibility of European Central Bank cuts by March.
The Dow Jones Index’s 4-hour chart reveals a sideways trading pattern within a bullish flag formation. This indicates indecision and the potential for a breakout in either direction. While the current price remains above the 50-SMA (blue line) and 100-SMA (orange line), suggesting underlying bullish momentum, a recent dip below the 20-SMA (green line) hints at potential short-term weakness.
The RSI rests at a flat level of 49.81, suggesting a potential for price stability in the near term, and a potential breakout could occur in either direction. Therefore, short-term trading opportunities could exist towards the resistance level at the 36,213 price level should the bulls sustain a push higher. A break above the initial resistance could confirm the bullish momentum, likely bringing the 36,334 and 36,456 resistance levels into play.
However, short-term trading opportunities could arise towards the initial support at 35,967 should the bears sustain a push below the range. A break below the 35,967 level would likely bring the 35,835 support level into play in the short term.
The overall outlook for the Dow Jones Index appears to be hanging on the edge, heavily influenced by forthcoming economic data, especially the US jobs report.
Technically, a sustained bullish move above 36,213 may pave the way for higher targets, while breaching 35,967 could indicate a short-term bearish trend.
Sources: TradingView, KoyFin, Reuters, Trading Economics.
Piece written by Mfanafuthi Mhlongo, Trive Financial Market Analyst
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