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Dow Jones Index: DJI Dragged Down by Stronger USD and Rising Yields

Dow Jones Index (DJI) Talking points:

  • Wall Street extends losses as US Dollar strength dominates markets
  • Dow Jones futures dragged down by rate expectations
  • DJI futures cling to 32,000 psychological level as participants continue to price in fundamentals

Dow Jones Index (DJI) Futures Weighed Down by Stronger Dollar

Dow futures gapped lower on the open as the sell-off in global equities gained traction. With US Dollar strength returning with vengeance, major stock indices relinquished August’s gains, pushing Wall Street futures back towards the key psychological level of 32,000.

The shift in sentiment comes after Fed Chair Jerome Powell confirmed the central bank’s intention to continue to raise rates aggressively until the target inflation rate of 2% is within range. After addressing key policymakers at last week’s annual Jackson Hole Economic Symposium, the probability of a third consecutive 75 basis point rate hike in September rose, driving US yields higher.

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Dow Jones Index (DJI) Technical Analysis

At the time of writing, Dow price action has been muted by the 50-day MA (moving average) which coincides with the 32,000-psych level mentioned above. If bears manage to drive prices lower, the 31,867 handle which capped the July move may come back into play.

Dow Jones Index (DJI) Daily Chart

Dow Jones Index: DJI Dragged Down by Stronger USD and Rising Yields

Chart prepared by Tammy Da Costa using TradingView

Meanwhile, Fibonacci levels from historical moves will likely continue to provide additional layers of support and resistance for Wall Street’s next move.

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After falling below 32,408 (the 23.6% Fibonacci of the 2020 – 2022 move), the four-hour chart below highlights the tight range that has developed after a brief retest of 31,976 earlier today. With the RSI currently trading in oversold territory, selling pressure could allow bears to continue to drive price action lower.

Dow Jones FuturesFour-Hour Chart

Dow Jones Index: DJI Dragged Down by Stronger USD and Rising Yields

Chart prepared by Tammy Da Costa using TradingView

Dow Jones Index Biggest Movers

Dow Jones Index: DJI Dragged Down by Stronger USD and Rising Yields

Source: Refinitiv

Dow Jones (DJI) Key Levels

Support

Resistance

S1: 31,867

R1: 32,387 (38.2% Fib of 2022 move)

S2: 31,700 (psych level)

R2: 32,408

S3: 31,337 (23.6% Fib of 2022 move)

R3: 32,800

— Written by Tammy Da Costa, Analyst for DailyFX.com

Contact and follow Tammy on Twitter: @Tams707