Yesterday, the US CPI report
came basically in line with expectations as the market was already expecting
higher energy prices to push up the August inflation readings. The Core
measure, which is what the Fed is focused on, was in line with forecasts with
the monthly figure just a touch higher than expected. The core 3-month
annualised rate is now 2.4%, which is a good indicator for the Fed that their
policy is working well. Now, the question is whether the labour market softens
enough to bring inflation sustainably back to target without a recession. And
this is something that never happened in history.
Dow Jones Technical
Analysis – Daily Timeframe
Dow Jones Daily
On the daily chart, we can see that the Dow Jones
recently bounced on the key trendline where we
had also the confluence with the
50% Fibonacci retracement level,
and rallied back into the resistance at
35000. The price then fell again and started to chop around as the market
remains uncertain on what’s next.
Dow Jones Technical
Analysis – 4 hour Timeframe
Dow Jones 4 hour
On the 4 hour chart, we can see that the price
action formed a symmetrical triangle and we
are just waiting for a breakout to decide where to go next. In fact, when the
price breaks out on either side of the pattern, we can generally see momentum
picking up and the price moving in the direction of the breakout in a sustained
way. So, this is now a game of patience.
Dow Jones Technical
Analysis – 1 hour Timeframe
Dow Jones 1 hour
On the 1 hour chart, we can see more
closely the price action within the triangle with the latest rejection from the
upper bound of the pattern. When the price starts to consolidate within such
patterns, there are no clear support and resistance levels as the price does
not respect them. The best strategy here is to wait for a breakout support by a
fundamental catalyst and then join the move.
Upcoming Events
Today is likely to be a volatile one given that we
are going to see lots of top tier economic indicators released at the same
time. In order of importance, we will get the US Jobless Claims, Retail Sales
and PPI data. The September FOMC meeting is already a done deal as the market
is pricing a 97% probability of a pause, so the data is going to influence the
November and December expectations. Tomorrow, we conclude the week with the
University of Michigan Consumer Sentiment report.