After falling short of the year-to-date high, the Dow Jones 30 Futures (CME: YM) have been subdued of late, trading lower for three out of the past four weeks. With the debt ceiling resolved, risk sentiment could creep back into the market, potentially favouring the index.
Last week, the Dow Jones 30 Futures closed with a 1.11% loss after the Greenback was boosted by a higher Core PCE Index, suggesting that inflation is sticky. The market is now pricing in a 67.6% chance of the Federal Reserve hiking rates in the upcoming June decision, up from 25.7% a week ago.
The Dow Jones 30 Futures have sustained a downtrend, with the price trading well below the 100-day moving average in a descending channel pattern. Support and resistance were established at the 32633 and 33695 levels, respectively.
After rejecting support, bullish traders piled into the market to take the index higher within a retracement. Price action stalled at the 61.80% Fibonacci Retracement Golden Ratio at the 33289 level. If bullish traders sustain their momentum, a high volume breakout above the Golden Ratio could set the tone for a move higher. The 33695 level will likely be the next point of interest in a bull case.
Alternatively, if the Golden Ratio holds as a dynamic resistance level, a reversal could take place as bearish traders regather their momentum. If supply outdoes demand, the 32633 level will be the next likely point of interest in a bear case.
The week ahead will provide traders with much data to determine the direction the index will potentially take. The U.S. will release the much anticipated Non-Farm Payrolls as the market attempts to determine if the labour market conditions will warrant another rate hike. The 33289 level will likely play a critical role in defining market sentiment.
Fuentes: CME, Reuters, TradingView