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Dow Jones index under pressure as high US inflation hurts sentiment

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Nick Goold

Dow Jones index

The Dow Jones index recorded its worst week of 2023 as US inflation data again came out higher than expectations. Hopes of a positive year are fading as the market worries about further interest rate rises to fight inflation. US 10-year interest rates continued to increase, hitting 3.95%, reducing the attractiveness of holding equities.

This week, various US economic data releases could move the market significantly. Recent US data has shown inflation is still high, and official US interest rates will continue to rise. Given the strong data, the Dow has not fallen that much, highlighting the market`s positive outlook for 2023. However, strong US economic data this week could trigger investors to change their minds and push the index below 32500.

The Dow continued to fall this week, but prices are still hovering above the December 2022 low of $32,500; until it breaks below $32,500, we should expect the market to remain sideways.

Dow chart Feb 27

Resistance: 33500, 34000, 34500, 35000, 35500, 36000

Support: 32500, 32000, 31000, 30500, 30000

Nikkei 225 index

The Nikkei 225 fell at the start of last week following US equities lower down to support at 27,000. Despite further losses from US equities, the Nikkei index recovered as the USDJPY surged higher to end the week. Japanese inflation data was the highest in 41 years at 4.2%, but this is unlikely to change Japanese monetary policy.

The USDJPY should continue to help the higher Nikkei index, but US equities will likely remain under pressure. The 27000 to 28000 range is likely to continue in the short term, with a test lower more likely at the moment.

Nikkei chart Feb 27

Resistance: 27500, 28000, 28300, 28500

Support: 27000, 26250, 25500, 25000, 24500

Great