Wednesday saw a retreat in Dow Jones futures (CME: YM) following the Federal Reserve’s latest stance on interest rates. The decision to maintain rates, aligning with general expectations, came with a caveat – the central bank expressed a need for heightened confidence in inflation progress before initiating any easing measures. Jerome Powell’s hint that such confidence might not materialize by the March meeting prompted traders to recalibrate their expectations for first-quarter easing.
Yet, the narrative unfolds further. The spotlight now shifts to tomorrow’s eagerly anticipated US Non-Farm Payroll report, promising valuable insights into the labour market’s resilience. With expectations set at a 180,000 print, any deviation from this figure, particularly on the downside, could become a catalyst for the US equity market. Such an outcome has the potential to reclaim ground lost after the Federal Reserve’s hawkish comments, adding an extra layer of anticipation to the Dow Jones futures’ price action.
Technical
On the daily chart, the recent uptrend was broken down, with the futures forming a consolidation range between 37,396 and 38,075. While a breakout occurred above the resistance of the range, the recent pullback could be the trigger to a potential trend reversal, making the upcoming sessions even more important.
A retest at 38,075 could occur in the upcoming sessions. If the price moves below this level, it could retest the 161.8% Fibonacci extension at 37,849, just below the 25-SMA. Any movement below this level could put the support at 37,396 at risk of a breakdown, which could send the futures below the 50-SMA toward 36,852. Lower support at 36,324 and 35,850 could come under the spotlight if the bearish momentum persists.
However, if the futures find support at 38,075, a pivot could occur to confirm the bullish breakout from the consolidation range. Resistance at 38,722 could then be all that stands in the way of the futures reaching new heights and continuing its upward ascent.
Summary
With the hawkish comments from Jerome Powell triggering a pullback in the US equity market, the focus will turn to the NFP report on Friday to determine whether a trend reversal could occur. Resistance-turned-support at 38,075 could be worth watching in the upcoming sessions.
Sources: Koyfin, Tradingview
Piece written by Tiaan van Aswegen, Trive Financial Market Analyst
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