Source: PaxForex Premium Analytics Portal, Fundamental Insight
The US Richmond Fed Manufacturing Index for December is predicted at -7. Forex traders can compare this to the US Richmond Fed Manufacturing Index for November, reported at -5.
Today’s trading session is light on economic data globally, and trading volume should be below average due to many traders taking extended time off during the Christmas holidays and New Year. The US Richmond Fed Manufacturing Index is likely to show the underlying trend of weakness, reinforced by the Dallas Fed Services Revenues and the Texas Services Sector Outlook. Traders have focused on the US Fed suggesting an end to their interest rate increases, with three interest rate cuts on the table for 2024.
Traders ignore what companies from shipping to retail say about their economic outlook, which paints a worse picture than economic headline figures. Declaring a victory on inflation is premature, as getting inflation from 3.0% to 2.0% will pose a significant challenge and could take twice as long as bringing it from 9.0% to 3.0%. Central banks risk policy mistakes, and input prices have increased and could rise over the next few months, which may force central banks to stay put.
The Dow Jones 30 Index offered bulls a nice rally, but hope was the driver behind price increases rather than reality. Traders should brace for volatility, as a profit-taking sell-off, partially fueled by end-of-year tax planning moves, and a rally to start the first week of 2024 are likely scenarios. Traders should also listen to consumers and how they feel about the economy, as debt and inflation crush their optimism.
The forecast for the Dow Jones 30 turned cautiously bearish after this equity index advanced 4,500+ points from its October 2023 low and 9,000+ points from its October 2022 low. The Tenkan-sen, the Kijun-sen, and the Ichimoku Kinko Hyo Cloud confirm the bullishness that drove price action higher, but traders should pay attention to signs that the rally is close to exhaustion. The CCI shows a negative divergence that formed in extreme overbought territory, followed by a breakdown below 100. Should this technical indicator move lower, it could provide bears the park for a year-end sell-off amid profit-taking. Can bears regain control over the Dow Jones 30 and force price action into its horizontal support area? Subscribe to the PaxForex Daily Fundamental Analysis and earn over 5,000 pips per month.
Should price action for the Dow Jones 30 Index remain inside the or breakdown below the 37,290 to 37,770 zone, PaxForex recommends the following trade set-up:
- Timeframe: D1
- Recommendation: Short Position
- Entry Level: Short Position @ 37.630
- Take Profit Zone: 32.300 – 32.720
- Stop Loss Level: 38.145
Should price action for the Dow Jones 30 Index breakout above 37,770, PaxForex recommends the following trade set-up:
- Timeframe: D1
- Recommendation: Long Position
- Entry Level: Long Position @ 34.145
- Take Profit Zone: 38.525 – 38.910
- Stop Loss Level: 37.770
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