Dow Jones Technical Analysis

Last week, the Dow Jones couldn’t extend the rally
into a new all-time high as the stronger than expected inflation data and the
quick rise in Treasury yields weighed on the stock market. There’s been also
some profit-taking as we approach the FOMC rate decision on Wednesday with the
risk of a hawkish surprise. Overall, the market is likely to remain supported
as long as the Fed does not restart to hike rates, or the economy does not
falter.

Dow Jones Technical
Analysis – Daily Timeframe

On the daily chart, we can see that the Dow Jones broke
out of the rising wedge recently
and started to consolidate just beneath the bottom trendline. The
breakout opened the door for a bigger correction into the 38043 level, but the
strong battle between buyers and sellers led to a rangebound price action ahead
of the FOMC rate decision. There are no catalysts now trading into the event,
so the technicals will likely lead the price action.

Dow Jones Technical
Analysis – 4 hour Timeframe

On the 4 hour chart, we can see that
the price managed to break above the downward trendline but got smacked back
down following some strong US data that raised the risk of a hawkish Fed on Wednesday.
We now have a range between the 38461 support and
the 39119 resistance, so the market participants will likely “play the range”
by buying at support and selling at resistance until we get a breakout.

Dow Jones Technical
Analysis – 1 hour Timeframe

On the 1 hour chart, we can see more
closely the recent rangebound price action. If the dip-buyers come into the
market strongly, then a break above the recent swing high at 38930 could lead
to a break above the 39119 resistance, although it might be better to wait for
the FOMC before taking new trades.

Upcoming Events

This week we have the FOMC rate decision on Wednesday
where the Fed is expected to keep rates unchanged. The market will be on the
lookout for hawkish surprises though following the stronger than expected
inflation data. On Thursday, we conclude with the latest US PMIs and Jobless
Claims figures.

This article was written by FL Contributors at www.forexlive.com.