The Dow Jones Futures (CME: YM) have recently formed new record highs, driven by a recent shift in the Federal Reserve’s stance on interest rates. This shift has sparked a remarkable 7-day winning streak that shows no signs of slowing down as we approach the new week.
Despite some tempered enthusiasm caused by comments from Fed official John Williams, who cautioned against premature discussions on rate cuts, the market remains resolute in anticipating rate adjustments by March, as indicated by the CME FedWatch Tool. The upcoming week holds significant importance, with Friday’s PCE data taking the spotlight. Any surprises in inflation could lead to a re-evaluation of the market’s expectations, adding an extra layer of anticipation to this crucial period.
Technical
On the 1D chart, the breakout from the descending channel has been sustained, fully retracing the prior downturn, where it now faces resistance at the 161.8% Fibonacci extension ratio. The 25-SMA (green line) and 50-SMA (blue line) have exceeded the 100-SMA (orange line), confirming the bullish presence as we head into the new week. However, the RSI indicates strong overbought conditions, which could keep the bears in play.
If the 161.8% Fibonacci extension provides resistance at 37,945, a pullback could occur, with the first potential support level established at 36,889. Should this support fail to hold, the price could test 36,447 before converging with the 25-SMA at 35,991. This could be a crucial support level as it could determine where the momentum is going in the upcoming sessions should a pullback occur.
However, with optimism running high in the US economy, the futures could continue reaching new all-time highs if it breaches resistance at 37,945. However, profit-taking action could trigger a pullback at any time should the current uptrend continue.
Summary
At new all-time highs, the Dow Jones 30 futures face resistance at 37,945 in the upcoming week. Should the momentum fail to breach this level, profit-taking action could trigger a pullback, with support at 36,889, a potential level of interest.
Sources: Koyfin, Tradingview, CME Group
Piece written by Tiaan van Aswegen, Trive Financial Market Analyst
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