US30 analysis following Fed-induced rally of 2.8%
The Dow Jones Industrial Average (DJI) jumped 2.8% yesterday after Fed Chair Jerome Powell said that the FOMC wasn't actively considering a 75bps hike. Instead, he suggested that 50bps was on the table for the next two meetings. This dovishness came after the Fed delivered a 50bps increase, in line with market expectations. It also clarified its balance sheet reduction, starting with $47.5bn/month in June and increasing over three months to $95bn/month.
FXCM's daily DJI CFD, US30, rallied 2.8% to 34,061 yesterday after the dovish-perceived comments by the Fed Chair. The 34,000 is the 50% retracement of the previous impulse down. It is also a level the market has reacted to previously (blue arrows), as resistance back in March and support in April. So we are looking to see if sellers target this level again.
The hourly chart will be instructive here. First, we note that the stochastic has crossed down (black ellipse) but is still near its upper quintile. If it breaks down and heads towards 20 (green rectangle), the bullish momentum will likely wane. The EMAs are also considered (red ellipse). If they cross down and develop angle and separation, the 34,000 level will prove resilient.
However, suppose the stochastic holds at its current position, and the EMAS develop angle and separation to the upside. In that case, the market will be looking to break through the key resistance at 34,000.
Russell Shor
Senior Market Specialist
Russell Shor joined FXCM in October 2017 as a Senior Market Specialist. He is a certified FMVA® and has an Honours Degree in Economics from the University of South Africa. Russell is a full member of the Society of Technical Analysts in the United Kingdom. With over 20 years of financial markets experience, his analysis is of a high standard and quality.
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