The NFP beat expectations, extending its impressive winning streak to 14. However, a closer look at the report reveals some less positive aspects. The unemployment rate saw its largest monthly increase since the pandemic, rising from 3.4% to 3.7%. In addition, the average hours worked per week showed a slight decline, which is often an indicator of potential layoffs. Overall, the report presented a mixed set of findings, offering something for everyone to interpret.
The US ISM Services Purchasing Managers’ Index (PMI) came in much lower than expected at 50.3, crossing the lower end of the contraction zone. The employment sub-index reversed a contraction, while the prices paid sub-index saw a significant decline, returning to levels last seen in May 2020. As a result, this prompted the market to further discount the prospect of additional rate hikes by the Federal Reserve. (fed).
In recent days, the Reserve Bank of Australia (RBA) and the Bank of Canada (BoC) surprised the markets by raising interest rates, which may affect the risk sentiment. This may have led to fears that the Fed will follow suit, although it seems unlikely given that the Fed usually responds to market pricing, and the Consumer Price Index (CPI) report has yet to be released.
Dow Jones technical analysis – daily time frame
Dow Jones Daily
In the daily chart, the Dow rose strongly after the NFP report as the price broke out of a trend line and momentum buyers jumped on board to extend the move towards swing high resistance at 33854. Since taking advantage of this resistance, the Dow has pulled back to the mean The blue 8 where the price was overextended after a rally. The moving averages have now crossed to the upside which may indicate a change in trend.
Dow Jones technical analysis – 4 hour time frame
Dow Jones 4 hours
On the 4 hours chart, we can see a nice support area at 33,330 where the Dow Jones might decline before deciding where to go next. In fact, we can find the confluence of the previous swing high as resistance, the 50% Fibonacci retracement level and the 21 daily moving average.
This is a really strong area technically. Buyers are likely to build on this support with specific risks just below it and aim for a break of 33854 resistance. On the other hand, sellers will want to see the price break lower before it builds up and extends the final sell towards 32684 support.
Dow jones technical analysis – 1 hour time frame
Dow Jones 1 hour
On the hourly chart, we can closely see the above setup. From a risk management perspective, there is nothing that can be done at the moment as the Dow may move pending CPI and FOMC events next week.
The US Unemployment Claims report is the main risk event to watch today. However, its impact on the market is likely to be limited unless there are significant deviations from the expected numbers:
- If the report significantly beats expectations, it could instill a sense of cautious optimism in the markets. Strong performance in the labor market, along with a cooling trend, may indicate a soft landing scenario, which could help bring inflation closer to the target.
- Conversely, if the report is significantly wrong with expectations, it could dampen market sentiment and potentially lead to a decline in the Dow. Such a scenario could reignite fears of an economic recession, which could have negative effects on market performance.