Bottom line: Dow Jones bearish structure is intact as long as prices stay below 29600 mark, in the long run. The counter trend rally is soon approaching a strong resistance zone around 25000/200 levels as traders prepare to resume lower.
Fundamental Outlook:
Dow Jones outlook shall rely heavily on the Q1 earnings, US GDP figures and the Fed rate decision to be out later today. The US Equity markets along with major Global Indices are set to face a gloomy outlook as Q1 GDP figures are expected to print lower (US Q1 GDP forecast is -4% against 2.4%). Most traders will also set their eyes on the Fed Rate Decision today, which is expected to be at 0.25%.
AUDUSD rose this morning as inflation figures came in at 2.2% beyond expectations of around 2%. The currency trades around 0.6230 as we write this article and expected to rise further. Still, with rising inflation, it is unlikely that the RBA will hike interest rates anytime soon. It would largely depend on how fast is the recovery post lock down.
On the COVID-19 pandemic, US crosses 1 million mark, the highest number of affected cases across the globe while the total number of deaths has been recorded at 59,266.
Technical Analysis:
Dow Jones bulls might seem to be in control since the 23000 intermediary lows but it could be a mistaken identity as the rally is just a counter trend. The indice should be facing strong resistance around the 25000 mark and probabilities for a bearish reversal remain high.
Dow Jones had earlier dropped from 29600 through 18200 levels, subdividing into 5 waves, which is labelled as Wave (1) on the 4H chart here. Since then, it has produced a corrective rally in the form of a zigzag (5-3-5). Furthermore, it could be unfolding its last leg towards 25000 mark.
The fibonacci 0.618 retracement of the drop between 29600 and 18200, is seen around 25250 levels. Also note the fibonacci extension of counter trend is seen at 25246 levels. There is a strong fibonacci convergence seen around 25200 levels. Hence a bearish reversal remains highly probable if prices manage to reach there.
Most traders might be preparing to initiate fresh short positions around 25200 levels, with protective stops above 29600 and projected targets below 18000 respectively.
Prepared by
Harsh Japee, Technical Analyst.
Dow Jones Chart
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