The Dow Jones 30 Futures (CME: YM) is down 50 basis points week-to-date, pressured lower by the lack of resolve regarding the debt ceiling. Markets have been left jittery as the possibility of a U.S. Default looms.

Traders will have plenty to watch this week on the economic calendar, with the U.S. PMI, Labour Market Reports, FOMC Minutes, and the critical Core PCE Index due this week. If the U.S. economy shows more signs of moderation as it has in the prior weeks, bets on a rate hike could subside, leaving equities with room to manoeuvre the upside on the potential of lower borrowing costs stimulating growth and future earnings.

Technical

The Dow Jones 30 Futures has structurally been in a downtrend, with a descending channel pattern forming as price trades below the 100-day moving average. Support and resistance were established at the 33031 and 34341 levels, respectively.

Given that the market has been pointing lower, the Dow Jones 30 Futures have been restricted from the upside, with the most downside pressure forming a resistance level at the 61.80% Fibonacci Retracement Golden Ratio. The 33853 Golden Ratio level has acted as resistance, and currently, price action is on a down move, with bears piling in on intense volumes. The 33031 level will most likely entice bears to keep at it.

Alternatively, a breakout above the Golden Ratio level could signal that bullish momentum has found its way back to the market. If a high volume breakout above the Golden Ratio occurs, bullish traders could pile into a move toward the 34341 level.

Summary

Markets will likely be on edge as the U.S. Debt Ceiling Crisis unfolds. Risk sentiment will probably be on hold as traders look to safeguard themselves from potential downside in a worst-case scenario of the U.S. defaulting on its obligations. The 33031 and 34341 levels will be critical levels which traders will monitor as the week unravels.

Sources: Reuters, TradingView