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Dow Jones Index: DJI Slides Amid Soaring DXY Index

  • Dow Jones Industrial Average is currently trading 1500 points below its 2023 highs.
  • Fed Chari Jerome Powell's recent testimony in Senate has put the 50 bps hikes back on the table.
  • Technical analysis shows that Dow Jones Index can dip another 1000 points before showing a significant recovery.

Dow Jones (INDEXDJX: .DJI) Index has lost all of its YTD gains due to unexpected January inflation data. The S&P 500 and Nasdaq 100 are also showing a similar price action as the Fed prepares for more rate hikes. This price action in the US equities is expected to remain highly volatile in the current month due to the release of CPI numbers and the FOMC meeting.

Due to sticky CPI inflation and the rising PCE inflation reports, analysts are expecting a 50 bps rate hike this month. The previous estimates predicted an increase of 25 bps, but it got changed by the hawkish Fed comments.

How Is The Dow Jones Doing Today?

At press time, the index is trading at 31800 after a sideways price action during the opening hours. The overall market sentiment for the day still appears to be unclear as the traders await February inflation numbers. Dow futures peaked at 33000 points during Thursday’s trading session. However, the short sellers became dominant and dropped the average below 33,800 once again.

In his testimony to US Congress, Fed Chair Jerome Powell came out very hawkish. According to him, the January inflation data was surprising for even the Federal Reserve. He also told the senators that the interest rates might need to be increased much higher than previously expected. The markets reacted immediately to these comments as Dow Jones Index and S&P 500 both slid by 1.5% on the same day.

Dow Jones Index May Continue Sideways Chop

Considering the following INDEXDJX: .DJI chart, it is quite obvious that the benchmark US industrial average is struggling to break above 34280 points. This level has acted as a point of rejection many times since August 2022. In 2023, Dow Jones Index retested this level in the first two months but failed to break above it on both occasions.

The US stocks started the year with a nice uptrend in January. The upward momentum was lost in February when the inflation reports disappointed the investors. If the ongoing correction continues, then I expect the Dow Jones Industrial Average to drop another 1000 points in March 2023. This will be a 3% decline from its current level.

Dow Jones Index Chart
Dow Jones Industrial Average Chart