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Dow Jones Outlook Talking Points:

  • A strong non-farm payrolls report is needed to rebound from last month’s miss and to stave off a hit to consumer confidence
  • The Dow Jones finds itself outside a nearby band of resistance that has held since early November
  • Learn to utilize IG Client Sentiment Data effectively with one of our many Live Sentiment Data Walkthroughs.

Dow Jones Outlook: Technical Resistance Tested, Awaits NFP Data

The Dow Jones breached a key technical barrier on Thursday, driving above 26,290 – a level which has held since early November. To continue its recent trend higher, the Dow Jones will look for strong non-farm payroll data on Friday morning. February’s report was wildly beneath expectations and a second month of soft employment data could begin to adversely impact consumer confidence and in turn, consumer spending.

US Employment Overview (Chart 1)

non-farm payroll chart 2019

In the Conference Board’s March consumer confidence report, curators of the index noted poor employment as a drag on overall confidence. “Confidence has been somewhat volatile over the past few months, as consumers have had to weather volatility in the financial markets, a partial government shutdown and a very weak February jobs report. Despite these dynamics, consumers remain confident that the economy will continue expanding in the near term. However, the overall trend in confidence has been softening since last summer, pointing to a moderation in economic growth” the report stated.

An underwhelming report tomorrow would further weigh on confidence and support claims from the IMF which recently slashed global GDP expectations. However, many market participants believe February’s data to be a one-off and expect a strong rebound in March. Whatever the outcome, the data will be critical for Dow Jones sentiment alongside trade war headlines.

Fresh quarterly forecasts are out! View Q2 forecasts for the S&P 500, US Dollar, British Pound and more.

On Tuesday I highlighted the possibility of US-China trade progress impacting the S&P 500. As the week has progressed, trade optimism has been heightened and conflicting reports of a potential Trump-Xi summit have surfaced Thursday.

As it stands at the time of this article’s publication, the Wall Street Journal and New York Times have released that President Trump will announce a summit date between the two leaders – likely to announce an agreement. On the other hand, Reuters has rebuffed the reports stating no summit date will be announced.

With the current landscape, it is likely the Dow Jones would be relatively unbothered by news that a summit will not take place – but it could place greater influence on the non-farm payrolls report. That said, a summit confirmation date could spark risk-on in earnest as the meeting will follow weeks of negotiations between US and Chinese officials.

Dow Jones Price Chart: Daily Time Frame (October 2018 – April 2019) (Chart 2)

Dow Jones price chart outlook

From a technical perspective, bulls may have room to run should the Dow maintain a daily close above 26,290. The index gapped through resistance from mid-October on Monday and the line will now look to act as support within the resistance band from mid-November.

View our Economic Calendar for live updates on data releases like non-farm payrolls and the US unemployment rate.

Heading into Friday’s session, all eyes are on non-farm payrolls and the US-China trade war. A positive surprise on either front could propel the Dow Jones to test 6-month highs near 26,940. For further equity insight, follow Peter Hanks on Twitter @PeterHanksFX.

--Written by Peter Hanks, Junior Analyst for DailyFX.com

Contact and follow Peter on Twitter @PeterHanksFX

Read more: S&P 500: Traders Remain Net-Short

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