Will US30 hit 40,000 milestone? :: InvestMacro

• US30 ends Feb over 2% higher

• Index set to be rocked by high risk-events

• Watch out for Powell Testimony + NFP report

• Bulls in control on D1/W1 timeframe

• Key level of interest at 39300

The extraordinary list of high-risk events could inject markets with fresh volatility in the week ahead!

Investors will be dished out a platter of top-tier data, complemented with key central bank decisions and major political developments across the world:

Monday, 4th March

• CHF: SNB publishes 2023 results
• USD: Philadelphia Fed President Patrick Harker speech

Tuesday, 5th March

• CNH: China National People’s Congress
• EUR: Eurozone S&P Global Services PMI, PPI
• GBP: UK S&P Global Services PMI
• USD: US ISM services, S&P Global Services PMI
• Super Tuesday in the United States

Wednesday, 6th March

• EUR: Eurozone retail sales
• GBP: UK Chancellor presents annual budget
• CAD: BoC rate decision
• USD: Fed Chair Jerome Powell testimony, Fed Beige Book

Thursday, 7th March

• CNH: China trade, forex reserves
• EUR: ECB rate decision
• USD: Fed Chair Jerome Powell testimony
• US President Joe Biden State of Union address

Friday, 8th March  

• CAD: Canada unemployment
• EUR: Eurozone GDP, Germany industrial production
• USD: US February nonfarm payrolls (NFP)

Our focus falls on the US30, which tracks the benchmark Dow Jones Industrial average index – featuring 30 industry leaders in the US economy.

The US30 ended February over 2% higher, bagging its fourth consecutive months of gains thanks to technical and fundamental forces.

Fun fact: The Dow Jones is one of the oldest U.S. indexes, having been created in 1896.

Given how prices are hovering near record highs, the question is whether bulls can keep up the momentum – especially with the 40,000 milestone just a stone’s throw away.

Here are 3 factors that could impact the index:

 

1. Fed Chair Powell’s 2-day Testimony

Fed Chair Jerome Powell’s semi-annual testimony before Congress may offer investors crucial insight into future policy moves. Powell is expected to signal that the Fed is not in a rush to cut interest rates until inflation moves closer to the 2% target. It is worth keeping in mind that the US30 which tracks 30 of the largest US companies, remains influenced by Fed rate expectations.

• If Powell strikes a hawkish note and signals that US rates will remain higher for longer, this may weigh on the US30 – inviting bears back into the scene.

• Should the Fed Chair sound more dovish than expected and signal that rate cuts could be around the corner, this may push the index higher.

 

2. US February NFP report

The US economy is expected to have created 190k jobs in February, a noticeable drop from the blowout 353k jobs added in January. However, this is still above Jerome Powell’s estimated neutral pace of 100k. The unemployment rate is forecast to remain unchanged at 3.7% while average hourly earnings are seen ticking lower to 0.3% month-on-month, down from 0.6% in the prior period.

Note: before the US jobs report on Friday, watch out for other key US data releases earlier in the week and speeches by Fed officials.

Traders are currently pricing in a 90% probability of a 25-basis point cut by June 2024, according to Fed Funds futures.

• The US30 is likely to trade lower if a strong US jobs report supports the case around the Fed keeping interest rates higher for longer.

• Should the NFP report disappoint, this could reinforce bets around the Fed cutting rates sooner than expected – boosting the US30 as a result.

 

3. Technical forces

The US30 remains in an uptrend on the daily charts as there have been consistently higher highs and higher lows. Prices are trading above the 50, 100 and 200-day SMA while the MACD trade above zero. However, the Relative Strength Index is not far away from overbought territory with some signs of exhaustion below the 39300 level.

• A solid breakout and daily close above 39300 may open a path towards fresh all-time highs with the next psychological level at 40000.

• Should 39300 prove to be reliable resistance, this could trigger a decline back towards 38500 and the 50-day SMA at 38170.