US indices traded higher on Friday at the back of renewed trade optimism and hopes of easier monetary policy from the FED. Friday’s weak jobs report showed that the US added 75k jobs versus an estimate of 185k while wage growth slowed thereby raising the chances of a rate cut from the Fed. A move that would support US equities whilst reinforcing the view of a weakening domestic economy. Markets focused on how economic data would support the case for a rate cut while disregarding its negative implications on the US’s economic performance. On trade news, The US and Mexico reportedly reached an agreement that would prevent the tariffs President Trump had threatened to implement today. This would provide markets with relief as it eliminates an additional trade concern against the backdrop of a prolonged US-China trade war that has weighed on global growth. Today, economic data is limited to US JOLT job openings which is estimated to decline however trade optimism and a lack of negative trade headlines should keep the Dow Index afloat.
The Dow rose 1.02% to reach 25983 and end the week in bullish territory. The index’s rally has shown no signs of slowing since Fed Chairman Powell’s dovish speech on Tuesday and is looking to hold above the 26,000 psychological level as it is currently trading above it. The RSI reading remains in the overbought territory suggesting an imminent turn lower once bullish momentum stalls while a bearish reversal candlestick formation indicates that price has found resistance around 26240 and that the short-term uptrend may reverse. Look for price to decline below the 25950 level coupled with the exit of the overbought region to suggest downside price action and target the 20-period MA around 25720. Alternately, a sustained move above 25950 would maintain buying pressure while a trade through 26240 would target the resistance at 26380.
Support: 25950/ 25720
Resistance: 26130/ 26240