Morning Brief: Dow Jones Breaks Key Support as Nikkei 225 Crawls Higher
Global stocks are mixed today as investors turn their focus on the upcoming US election. In Asia, the Hang Seng and Shanghai composite are down by 1.70% and 0.70%, respectively. The Nikkei 225 is in the green, up by about 0.20%. In Europe, futures are in the red, with those tied to the DAX index, CAC 40, and FTSE 100 down by more than 0.57%, 2.0%, and 0.72%, respectively. The same story is happening in the US, where Dow Jones, S&P 500, and Nasdaq 100 are down by more than 0.50%.
A contentious election is the biggest concern among traders. The situation worsened during the weekend when Supreme Court justice, Ruth Bader Ginsberg (RBG). In a statement, Mitch McConnel said that Trump’s nominee will get a vote in the senate. And Trump is expected to come up with a nominee this week.
Democrats and key Republicans have opposed the idea of voting for a justice before the election. Therefore, it seems like the issue of the Supreme Court will be the key defining moment for the election.
Meanwhile, in currencies, the US dollar index is struggling today as traders continue to reflect on the FOMC decision and the weak economic data from the United States. As you recall, last week, the Fed decided to leave interest rates unchanged and sent a signal that it will not raise in the near term. Today, the dollar will likely react mildly to a testimony by Jerome Powell in congress.
The economic calendar will have no major events today. Therefore, traders will be focusing on key currencies ahead of their respective central bank decisions. The notable banks that will deliver their decisions this week will be the Swiss National Bank (SNB), Reserve Bank of New Zealand (RBNZ), Riksbank, and Norges Bank, among others.
Dow Jones technical forecast
The daily chart shows that the Dow Jones is in a tough place. The index is trading at $27,565, which is the lowest it has been since Friday. It has moved below the ascending red trendline. Also, it had formed an inverse hammer pattern on September 16. Most importantly, it has moved below the 10-day and 20-day moving averages and is below the middle line of the Donchian channel.
Therefore, I suspect that, in the near term, the path of least resistance for the index is lower. If it does, it is likely to test the lower side of the channel at $27,195. In this case, the stop will be the September 16 high of $28,395.