Dow Jones Technical Analysis: Recouping Some Losses

Our expectations suggest a return to the index’s decline during its upcoming trading.

The Dow Jones Industrial Average rose during its recent trading at intraday levels, to break a series of losses that continued for five consecutive sessions, achieving gains in its last sessions by 1.00%. It gained about 303.70 points and settled at the end of trading at 30,668.54, after its decline during Tuesday’s trading by -0.50%.

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Investors seemed comfortable that the US central bank had met market expectations that it would act aggressively to tame rising inflation, and for now seemed comfortable with the Fed’s prediction that the economy was likely to slow in the next two years. The Federal Reserve raised its interest rate by 75 basis points on Wednesday, the largest such increase in nearly 30 years, as the central bank quickly cools inflation that has reached four-decade highs that have proven difficult to tame.

In a statement, Fed officials said they now expect the central bank’s policy rate to rise to around 3.4% by the end of this year, while 2023 ends near 3.8%. They also expect the economy to slow to a 1.7% growth rate this year.

Federal Reserve Chairman Jerome Powell said during his press conference that the Fed hopes to rely on the data at some point. This means that with slowing economic growth and inflation, the Fed may consider slowing the pace of interest rate hikes, as it tries to avoid pushing the economy into recession.

Economic data on Wednesday showed US retail sales fell below expectations by 0.3% in May, while sales excluding autos rose 0.5%, and excluding autos and gas sales rose 0.1%.

Technically, the index is trying with this rise to compensate for part of what it incurred from previous losses. At the same time, it is trying to discharge some of its clear oversold by the relative strength indicators, especially with the beginning of the emergence of a positive crossover in them. This is in light of the dominance of the short-term corrective bearish trend along a slope line, with the negative pressure continues for its trading below the simple moving average for the previous 50 days.

Therefore, our expectations suggest a return to the index’s decline during its upcoming trading, especially throughout its stability below the resistance level 31,000, to target the support level 29,550.