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Talking Points:

- After spending most of last week digesting a prior bearish trend, US stocks put in bullish breakouts after Non-Farm Payrolls and this helped the Dow Jones Industrial Average firm-up to fresh three-week highs. Prices found resistance at a key Fibonacci level and have since started to pullback, keeping the door open to bullish continuation strategies in the index.

- If the Dow Jones can take-out this three-week high, the door is open to a re-test of the 25,000 level that we last traded at in mid-June.

- 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 Drives to Three-Week Highs After NFP

The Dow Jones Industrial Average caught a bid after last week’s Non-Farm Payrolls report, and that strength lasted into the early part of this week as the index firmed up to a fresh three-week high. We were previously tracking a digestion formation in the Dow after price action had continued to narrow as we traded into Q3. The bullish breakout began shortly after US markets opened on Friday after the release of June payroll numbers out of the US, and prices ran-up to the 23.6% retracement of the April to June major move before starting to pullback.

Dow Jones Four-Hour Price Chart: Bullish Breakout Finds Fibonacci Resistance

Dow Jones Four hour price chart

As we had written on Tuesday, traders would like want to wait for prices to digest at least some of this breakout before plotting continuation, and we had looked at two zones of interest for possible higher-low support. The 38.2% Fibonacci retracement of the April-June move is at 24,624, and that helped to catch last night’s low. A bit-higher at 24,730 we have a prior price action swing, and this is helping to furnish higher-low support after prices bounced from the 38.2% Fibonacci retracement. This keeps the door open for bullish continuation with targets cast towards the 23.6% retracement at 24,921, with the possibility of secondary targets at the psychological level of 25,000.

Dow Jones Hourly Chart: 38.2% Fibonacci Support Produces Higher-Low

Dow Jones Hourly Price 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