Bottom line: Dow Jones long term structure remains bearish against 29600 resistance. Also, the counter trend rally that began in March seems to be complete at 27600/700. Bears might be ready to plunge lower towards 18200.
Fundamental Outlook:
Dow Jones is seen to be trading close to 26200 mark as we prepare the article, having recovered over 50% of the drop from early June. Despite Fed Stimulus and its commitment of doing more, the fact remains that US and World Economy is facing a prolonged recession. Over 38 million Americans have filed for benefits over job loss due to COVID-19 pandemic.
The forthcoming IMF forecast for Global Growth is also expected to be lower than its April outlook. Along with US and Europe, the emerging markets growth outlook has also deteriorated. Global indices have shown muted response over the rising COVID-19 infections (US, India and other countries) but this may quickly change.
AUDUSD, the risk-related currency pair gained yesterday as risk-assets and Global markets rallied. The exchange rate is trading close to 0.6950 mark and could continue further towards 0.6975/0.7000 levels. If risk aversion returns, AUDUSD may face renewed selling pressure around the above levels.
Technical Analysis:
Dow Jones price action is nothing less than confusing to many traders and investors in recent times. But the story is clear on the charts that bears are set to regain control back, and the indice might be heading lower towards 18200 mark.
Dow Jones had earlier dropped from 29600 through 18200 as an impulse wave. Ideally, an impulse is followed by a corrective rally. Since March 23, 2020; the indice has produced a counter trend rally, which might be complete at 27600/700 levels.
Dow Jones might resume lower against the 27600/700 mark and produce another impulse wave lower towards 18200. Also note that the counter trend rally had reached fibonacci 0.786 retracement of the earlier drop.
Traders might remain inclined to initiate fresh short positions here (26200/300), with protective stop above 29600 and projected targets below 18200. Only a break above 29600 would change the bearish structure.
Prepared by
Harsh Japee, Technical Analyst.
Dow Jones Chart
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