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Dow plunges with eye on central bank meetings -

Jul, 26th 12:21

Dow Jones index lost 0.07% to around 18498.00 today in comparison with yesterday’s session close. The US equity markets tumbled as investors stayed cautious ahead of the Federal Reserve (Fed) and the Bank of Japan (BOJ) policy meetings later this week. Besides, a downturn in oil prices also led losses in energy stocks.

Oil market faces concerns that growing gasoline inventories during the peak U.S. summer driving season and a steady rise in working drilling rigs will push up crude inventories, depressing prices and profits. According to Baker Hughes, the number of US rig count was up for the fourth consecutive week, increasing by 15 to 462 for the week of July 22. This indicated that the period of US production decline has been nearly ended, showing a negative signal to oil prices.

Exxon Mobil shares fell 1.9% to 92.20, while Chevron shares dropped 2.5%, ending yesterday’s session at 103.07. These were the two biggest companies that led the Dow Jones down.

Investors have been focusing on the monetary policies of the Fed and the Bank of Japan this week, with recent encouraging US data prompting investors to reassume the prospects of the US central bank raising borrowing costs later this year, although they expect it to stand pat on Wednesday.

Regarding the comment of San Francisco Fed President John Williams, one of the 17 members participating in the central bank’s rate-setting deliberations, all Fed needs is more confidence that inflation, currently staying at 1.6% is headed towards the Fed’s target of 2%.

The Bank of Japan (BOJ) is expected to double net fiscal spending to 6 trillion yen at the upcoming policy conference. Bank of Japan Governor Haruhiko Kuroda said on Saturday he would ease policy further if necessary to achieve its 2 percent inflation goal.

DJ

Fig. DOW JONES D1 Technical Chart

Dow Jones have retreated from the record high of 18651.12, escaping the overbought zone as seen RSI lingering at 62.82 and pointing down. The +DI (green line) has turned its head down towards the –DI (red line), suggesting that the bull is becoming weaker. The price is expected to break the 10-day moving average and plunge further for at least the rest of the day. The index is likely to test the support level at 18175.44. After that, a rebound may happen.

Trade suggestion

Buy Digital Put Option from 18493.00 to 18175.44 valid until 20:00 July 29, 2016

 

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