The Dow Jones is testing a break above a short-term descending trendline after July Core PCE inflation data matched forecasts, leaving Federal Reserve rate expectations for September unresolved. The index now trades in a tight range between 53,490 and 53,700, with technical indicators showing no clear direction.
The Dow Jones has pushed above a short-term descending trendline on its four-hour chart, but the move remains unconfirmed. The index moved beyond the trendline on August 25, after a decline from a local peak around 54,700.
Inflation data leaves rate path unresolved
The US Commerce Department released July Personal Consumption Expenditures data on August 26, showing Core PCE rose 0.2% month-on-month and 3.3% year-on-year, in line with market expectations. Ellen Zentner, Chief Economic Strategist at Morgan Stanley Wealth Management, said the modest upside surprise in inflation was not significant enough to shift the balance of expectations ahead of the Fed's September meeting.
Minutes from the Fed's July meeting, released on August 19, showed policymakers remained open to further rate increases if inflationary pressures persisted, with three committee members having already voted in favour of a hike. Against this backdrop, Treasury yields remain close to multi-year highs, keeping rate expectations tilted towards the possibility of further tightening.
Index trades inside a dense profile range
The Dow Jones is now trading between the Point of Control at 53,490 and the upper boundary of its market profile at 53,700. If the breakout develops into a sustained advance, the next level to watch is resistance around 53,900.
Conversely, if the breakout proves false and the decline resumes, price would first need to move through the Point of Control at 53,490, then break below the lower profile boundary at 53,320 before the path toward support around 53,150 opens up. The RSI and moving-average indicator currently shows readings of 52, 55 and 51, with the oscillator and both moving averages sitting in the neutral zone, though the moving averages still display a bullish signal.
No clear confirmation either way
The attempted break above the descending trendline is taking place within a dense market-profile area, which provides no clear confirmation of a sustained move in either direction.
Source: ActionForex
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