US indices traded higher while US treasury yields rebounded on Tuesday at the back of news that the US would delay imposing proposed tariffs on particular Chinese goods. The move doesn’t resolve the trade war however improves sentiment towards the US-China trade impasse as it benefits US businesses. In terms of data, US CPI figures beat expectations and showed a pick up inflation as the core CPI climbed to 2.2% YoY and increased by 0.3% MoM. This may not discourage monetary policy easing as the downside risks stemming from the trade conflict on the US economy remain. Today, US economic data is limited to trade figures and leaves geopolitics and trade headlines of stronger influence over price action.
The Dow reversed losses from the previous session as it ended 1.44% higher at 26279 on Tuesday. The price managed to find support from yesterday’s low around 25800 and bounced higher to trade through the 50-period MA towards the resistance zone around 26380/26400. Since bottoming at 25024 in early August, price action has formed a slope of higher lows whilst respecting the resistance at 26400. This chart pattern forms an ascending triangle which could result in a breakout in either direction. For today, look for a sustained move above the 26200 level to indicate buying pressure with a break through the resistance of 26400 required to target higher levels at 26500 and 26590. On the other hand, a trade below the 20-period MA at 26145 would indicate selling pressure and lead price towards lower support at 26030.
Resistance: 26405/ 26500