Talking Points:

- The Dow Jones Industrial Average is testing a confluent area of resistance this morning after a healthy gap-higher, driven by a strong US Non-Farm Payrolls report.

- This highlights a short-term symmetrical wedge pattern, which is taken place within a longer-term symmetrical wedge. We look at both below, aiming to trade a directional break of the short-term wedge in consideration of the longer-term formation.

- DailyFX Forecasts have been updated for Q2, and are available from the DailyFX Trading Guides page. If you’re looking to improve your trading approach, check out Traits of Successful Traders. And if you’re looking for an introductory primer to the Forex market, check out our New to FX Guide.

Do you want to see how retail traders are currently trading the US Dollar? Check out our IG Client Sentiment Indicator.

Dow Jones Industrial Average Gaps Up to Confluent Resistance

US stocks are higher on the morning after the release of a very healthy jobs report for the month of May. This continues the bounce that’s shown over the past three trading days after the earlier-week swoon, driven in-large part by political volatility in Europe that’s appeared to hit a state of calm. At this point, the Dow Jones Industrial Average is testing a trend-line taken from the highs over the past week, with a bit of secondary resistance coming-in from that prior area of range support around 24,630.

Dow Jones Four-Hour Chart: Testing Trend-Line Resistance

DJIA Dow Jones Industrial Average Hourly Chart

Chart prepared by James Stanley

When taken with short-term price action observations, this bearish trend-line helps to set up a congestion formation as prices are trading deeper within a symmetrical wedge pattern. This congestion also helps to set up the index for directional plays, as a break below this week’s low around 24,339 indicates bearish resolution of this pattern, and opens the door for short-side strategies. On the other side of the Dow, a bullish break of the swing-high at 24,704 sets up for a challenge of 24,900, followed by a re-test of the psychological level of 25,000.

Dow Jones Hourly Chart: Building Symmetrical Wedge

DJIA Dow Jones Industrial Average Hourly Chart

Chart prepared by James Stanley

Taking a step back on longer-term charts of the Dow, and we can see another digestion formation brewing, as there’s a longer-term symmetrical wedge at work as prices have narrowed over the past few months. This helps to demarcate longer-term targets for each potential directional move. On the short-side, the prior swing-low is around 23,514; while the topside of the index highlights the prior swing-high at 25,078. Breaks through either of these longer-term swings opens the door for continuation; but until then, we have to watch for the shorter-term congestion formation to give way before these longer-term points of interest can come into play.

Dow Jones Daily Chart

DJIA Dow Jones Daily Chart

Chart prepared by James Stanley

To read more:

Are you looking for longer-term analysis on the U.S. Dollar? Our DailyFX Forecasts for Q1 have a section for each major currency, and we also offer a plethora of resources on USD-pairs such as EUR/USD, GBP/USD, USD/JPY, AUD/USD. Traders can also stay up with near-term positioning via our IG Client Sentiment Indicator.

Forex Trading Resources

DailyFX offers a plethora of tools, indicators and resources to help traders. For those looking for trading ideas, our IG Client Sentiment shows the positioning of retail traders with actual live trades and positions. Our trading guides bring our DailyFX Quarterly Forecasts and our Top Trading Opportunities; and our real-time news feed has intra-day interactions from the DailyFX team. And if you’re looking for real-time analysis, our DailyFX Webinars offer numerous sessions each week in which you can see how and why we’re looking at what we’re looking at.

If you’re looking for educational information, our New to FX guide is there to help new(er) traders while our Traits of Successful Traders research is built to help sharpen the skill set by focusing on risk and trade management.

--- Written by James Stanley, Strategist for DailyFX.com

Contact and follow James on Twitter: @JStanleyFX