Bottom line: Dow Jones long term structure continues to remain bearish against 29600 resistance. Also, the counter trend rally might have terminated just below 25000 mark, as traders might be preparing to resume lower towards 18000.
Fundamental Outlook:
Dow Jones optimism might be fading after the indice along with SPX500, reversed sharply from close to 25000 levels last week. The price action would also depend on the upcoming Job Data on Friday, as record job losses are expected (over 21 million) and unemployment reaching double digits (roughly 16%).
The optimism over several US states to re-open may be short lived as COVID-19 led recession looms ahead. US President Trump hinting to slap tariffs on China may add further pressure. Investors might be prepared for another round of sell off across Global Indices, going forward.
AUDUSD has managed to produce an impressive come back since its March 18 lows at 0.5505 levels. The pro risk currency has rallied over 1000 pips and register a high at 0.6570 levels on April 30, 2020. As the momentum for risk assets (Global Equity Markets) begin to fade amidst fears of a US-China trade war and looming recession linked to COVID-19; it would be interesting to see how AUDUSD price action behaves. Watch out for the Friday Monetary Policy statement from RBA for some volatility in AUDUSD.
Technical Analysis:
Dow Jones remained shy of 25000 mark last week and reversed lower from 24897 mark. This could be the end of the counter trend rally that had begun since March 23, 2020 from 18200 levels. The indice needs to consistently break below 23000 mark to confirm that a meaningful lower top is in place. Bears are set to remain in control from there.
Dow Jones had earlier dropped from 29600 through 18200 levels in an impulse wave. As expected, the counter trend rally has managed to reach 14897 levels. The fibonacci 0.618 retracement of earlier drop is around 25200 and the indice was expected to test those levels. Please be prepared for a sharp bearish reversal if Dow Jones still manages to reach there.
Traders might have initiated fresh short positions close to 25000 mark and might sell further around 25200, going forward. The protective stop loss could be kept above 29600 levels and projected targets below 18000 respectively.
Prepared by
Harsh Japee, Technical Analyst.
Dow Jones Chart
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