Dow rally needs a Fed recharge
A pause in tightening may no longer be enough.
Share this:
A pause in tightening may no longer be enough.
Only the abrupt halt of the Federal Reserve’s tightening cycle has saved markets from severe selling pressure, according to renowned bond investor Jeffrey Gundlach. As trade-talk optimism returns to buoy large markets, it may be too early to judge whether such pessimism is misplaced or not.
Yet, the approach of next week’s Federal Reserve statement is probably a potent cautionary influence. With no prospect of a policy change, participants are fixating on the FOMC’s planned forecast tweaks and any changes to its bias for one hike this year and one in 2020. Aside from last week’s weak-payrolls shock, largely solid economic data implies the Fed can reserve judgement for months yet. As such, inflation and growth forecasts are likely to be reduced only moderately. Such cues could underpin U.S. markets for a further spell, but greater clarity will be needed for a concerted push back to recent zeniths.
From a chart perspective, the Dow Jones e-mini future’s breach of a beautiful January-March trend has left it less assured. Modest gains on the day and week were too tentative to penetrate layers of resistance from around 25890 that protect 2019 highs.
The 100-hour moving average has at least pulled up from a recent dive. Yet a flatter intermediate trend gauge should still temper perceptions. Early next week, the Dow will need to remain above such thresholds in order to mount further attacks on overhead barriers. Any failure risks a more pronounced descent that will target swing lows near 25250 as a first course.
Related tags:
Latest market news
Open an account in minutes
Experience award-winning platforms with fast and secure execution, and enjoy tight spreads from 0.5 pts on FX and 0.3 pts on indices.
Economic calendar
Web Trader platform
Our sophisticated web-based platform is packed with features.
Related articles
Gold Analysis: Rising Yields and Dollar Strength Weigh on XAU/USD
The trading week continues, and for now gold remains under notable pressure in the short term. This can be seen in the performance of XAU/USD over the last three trading sessions, where the metal has declined by more than 2.00%, bringing a bearish bias back into focus after it had lost momentum in recent weeks.
USD/MXN Analysis: Can the Peso Recover Against a More Aggressive Fed?
Although the Mexican peso is attempting to regain some ground during today's session, price action throughout the week shows a gain of more than 1.00% in USD/MXN, highlighting buying momentum that continues to favor the U.S. dollar.
EUR/USD outlook: Hawkish Fed puts euro on the ropes
The Fed delivered a unanimous hike, stronger economic projections and a more hawkish dot plot, giving markets little reason to unwind aggressive tightening bets and keeping the dollar firmly supported.
This report is intended for general circulation only. It should not be construed as a recommendation, or an offer (or solicitation of an offer) to buy or sell any financial products. The information provided does not take into account your specific investment objectives, financial situation or particular needs. Before you act on any recommendation that may be contained in this report, independent advice ought to be sought from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs.
StoneX Financial Pte. Ltd., may distribute reports produced by its respective foreign entities or affiliates within the StoneX group of companies or third parties pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed to a person in Singapore who is not an accredited investor, expert investor or an institutional investor (as defined in the Securities Futures Act), StoneX Financial Pte. Ltd. accepts legal responsibility to such persons for the contents of the report only to the extent required by law. Singapore recipients should contact StoneX Financial Pte. Ltd. at 6826 9988 for matters arising from, or in connection with the report.
In the case of all other recipients of this report, to the extent permitted by applicable laws and regulations neither StoneX Financial Pte. Ltd. nor its associated companies will be responsible or liable for any loss or damage incurred arising out of, or in connection with, any use of the information contained in this report and all such liability is hereby expressly disclaimed. No representation or warranty is made, express or implied, that the content of this report is complete or accurate.
StoneX Financial Pte. Ltd. is not under any obligation to update this report.
Trading CFDs carries a high level of risk that may not be suitable for some investors. Consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances carefully. The possibility exists that you could lose some or all of your investments, including your initial deposits. If in doubt, please seek independent expert advice. Visit www.forex.com/en-sg/terms-and-policies for the complete Risk Disclosure Statement.