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Dow Reverses from Fibonacci Resistance After FOMC, ECB

Dow Reverses from Fibonacci Resistance After FOMC, ECB

James Stanley, Senior Strategist

Talking Points:

- A bit of pressure has started to show in US stocks after this week’s outlay of risk events. FOMC and ECB helped to push matters, but exacerbating the situation was another flare of tariff/trade war worries along with another fresh bout of European political risk.

- The Fed was fairly clear in their hawkish drive at this week’s FOMC meeting, and rising rate cycles have a tendency to provide pressure to built-in bullish equity trends. Will a persistently hawkish Fed, combined with some additional risk items be enough to elicit a deeper reversal in the Dow?

- DailyFX Forecasts 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 Reverses from Fibonacci Resistance

On Tuesday, we looked at the Dow Jones Industrial Average putting in its second day of resistance at a key Fibonacci level. The price of 25,370 is the 14.4% retracement of the post-Election move, and this is the same level that helped to mark the March swing high in the pair. As we wrote, there was little on the bullish side and the one item of excitement was a potential bearish reversal off of this level as we moved towards the FOMC/ECB outlays that were on the calendar for the next couple of days.

That reversal has played out as resistance held, and prices are now back below the vaulted psychological level of 25,000 that had previously led-in to a strong support play.

Dow Jones Daily Chart: Reversal From 14.4% Fibonacci Resistance

Dow Jones DJIA DIA Daily Chart

Chart prepared by James Stanley

This reversal has thus far amounted to a 23.6% Fibonacci retracement of the bullish move that started in early-April, and it looks as though this support may not hold for long. That exposes deeper potential areas of support around 24,750 and 24,624, which is the 38.2% retracement of the same post-election move in the Dow Jones.

Dow Jones Four-Hour Chart: A 23.6% Retracement of the April-June Move

Dow Jones DJIA DIA Four-Hour Chart

Chart prepared by James Stanley

On the bullish side of the Dow, the area of interest appears to be around the prior swing-low from late-May, and this takes place around 24,384 which is the 50% retracement of that April-June move. Just a bit higher at 24,522 we have the 23.6% retracement of the post-Election move, and collectively, these prices form an area that can be attractive for higher-low support in the early portion of next week should buyers actually begin to show at that area.

Dow Jones Daily Chart: Deeper Support Potential 24,384-24,522

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

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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