Thursday, October 10, 2019



Fundamental Highlights

US indices traded higher on Wednesday as trade hopes were revived by reports that China is open to a partial trade deal so long as the US would refrain from imposing further tariffs. However, the US’s most recent blacklisting of Chinese tech companies undermines the prospect of any progress. Moreover, the two nations seem to be aware that a breakthrough is unlikely in the near-term and have resorted to ways of mitigating the negative impacts of the trade war. On monetary policy, the FOMC meeting minutes revealed that policymakers believed that market expectations for rate cuts were beyond the FED’s stance on the future outlook. However, the main driver for price action is US-China trade developments as it is at the forefront of markets’ concerns. Today, the US publishes CPI data and jobless claims but the stronger influence will be to trade headlines as the US and China begin their highly anticipated trade negotiations.

Technical Analysis

The Dow gained 181 points to end at 26346 on Wednesday as price bounced off the support at 26090 however remained below the dynamic resistance zone bounded by the 20-period and 50-period MA. Today, Dow futures briefly dropped below the 26080 support and tagged the 200-day MA at 25988. We may see the Dow exhibit range-bound price action until there is a sustained move above the 20-period MA near 26350 or a sustained decline below the support at 26080 to indicate direction. Below 25080, price would resume its bearish phase and target 25980 and 25800. Meanwhile, trade above the 50-period MA around 26420 would signal a more bullish view. Direction will be highly determined by US-China trade talks.

Support: 25980/ 25800
Resistance: 26350/ 26560

Chart (H4)