The Dow Jones futures jumped by more than 100 points even as tensions between the US and China continued to escalate. The weaker US dollar provided the much-needed support for the blue-chip index. S&P 500 and Nasdaq futures also rose by 0.50% and 1.08%, respectively.
China lambasts US political madmen
The Dow Jones futures rose even as China blasted US political madmen as tensions between the two countries continued. The situation rose after US security officials conducted a search at the Chinese consulate in Houston and after China moved its military to the South China Sea. In an editorial, the Global Times asked the world not to be hijacked by US political madmen. It said:
“Most Americans do not want to see a war break out either. However, Americans’ populism and displeasure over China’s rapid development may be exploited by US President Donald Trump’s administration. American people believe US government officials know how far to go and when to stop. “
The rising tensions are not good for companies in the Dow Jones. That is because these firms do a lot of business in China and have a lot to lose if the situation continues to escalate.
US dollar provides support to the Dow Jones
The Dow Jones is probably rising because of the US dollar. The currency declined against most currencies today. It is down by more than 0.80% against the Japanese yen, 0.65% against the euro, and by 0.55% against the British pound.
A weaker US dollar is beneficial for the Dow Jones and other US stocks because it makes their goods competitive in the global stage. And, in most cases, US stocks tend to do well when the dollar is weak.
Meanwhile, the low real yields in US treasuries have led to a rotation from bonds to stocks and other assets.
Dow Jones technical forecast
Dow Jones futures are up slightly today. On the daily chart, it is slightly above the 50-day and 100-day exponential moving averages and slightly below the 78.6% Fibonacci retracement level. Also, the price is above the ascending trend line that is shown in purple. Therefore, the overall trend of the Dow Jones is bullish so long as the price remains above $26,000.
Moves below $26,000 will invalidate the bullish trend. This price is both at an important psychological level and also along the ascending trend line.