Bank of America just raised its EUR/USD forecast
- Tech stocks have come under pressure this week, but this could be temporary.
- Markets await Fed Chair Powell’s speech for policy clarity, which could act as the catalyst for an upward breakout.
- Dow Jones faces massive resistance at 45,000 but sector rotation could cushion it from tech weakness.
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US stock futures signalled a weaker open after several days of selling in the tech space, with investors now looking ahead to the Federal Reserve’s gathering at Jackson Hole. Technology shares have been under strain this week, particularly the heavyweight names, as doubts grow that the sharp rally since April may have run ahead of itself.
Traders are keeping their powder dry as the Jackson Hole symposium gets underway later today, with Fed Chair Jerome Powell’s remarks on Friday expected to set the tone for interest rate expectations. All told, the markets are simply consolidating, and we could see renewed buying interest soon, which could see the Dow Jones finally clear that 45K hurdle.
All Eyes on Powell Now After FOMC Minutes Highlighted Inflation Risks
Minutes from the Fed’s late-July meeting revealed most policymakers see inflation risks as outweighing concerns over the labour market, with tariffs exacerbating divisions inside the central bank’s rate-setting committee. But the significantly weaker jobs data and revisions we saw last month suggests the balance may well tilt towards the dovish camp, who appear more inclined to look through tariff-induced inflationary pressures.
The FOMC minutes are out-dated now, and so markets are now looking ahead to Fed Chair Jerome Powell’s upcoming remarks at the Jackson Hole gathering, which could provide the clarity investors are seeking. With valuations elevated, many traders have chosen to lock in profits ahead of his comments rather than continue chasing risk.
Yet, expectations remain tilted toward the Fed signalling a shift toward more accommodative policy, which has so far supported global equity markets.
Indeed, global stock indices continue to push higher, with records being set across multiple benchmarks. Yesterday, it was the FTSE 100’s turn to post fresh highs, shrugging off a hotter-than-expected UK inflation print. Such moves reinforce the narrative that central bank support is a powerful driver for risk assets, keeping downside risks limited despite sector-level volatility.
Sector Rotation Keep Dow’s Losses Limited
The divergence between technology and other sectors was clear in yesterday’s trading session and this is something that could happened again.
Shares of DOW for example surged 2.3%, placing it firmly at the top of the index leader board, while Travelers (NYSE:TRV) and consumer giants like Coca-Cola (NYSE:KO), McDonald’s (NYSE:MCD), and Walmart (NYSE:WMT) each posted respectable gains.
On the flip side, technology laggards weighed heavily. Intel (NASDAQ:INTC), Apple (NASDAQ:AAPL), and Microsoft (NASDAQ:MSFT) were among the biggest decliners, reflecting renewed selling pressure on the sector amid profit-taking.
The weakness in the tech sector has been more pronounced across the semiconductor space in the likes of Nvidia (NASDAQ:NVDA) and Broadcom (NASDAQ:AVGO). While profit-taking is clearly a factor here, the sector-wide downturn also underscores mounting concerns over stretched valuations in high-growth tech and raises questions about whether investor appetite for semiconductors has peaked in the near term.
Dow Has Found 45K Hurdle a Tough Nut to Crack
The Dow Jones Industrial Average continues to flirt with the 45,000 mark, a level that has frustrated the bulls for months. While tech stocks have dragged Wall Street lower this week, strength in other sectors such as financials, energy, and telecoms have helped cushion the blow.
This sector rotation highlights that, despite ongoing volatility, the broader market backdrop for US equities remains constructive. As a result, the medium-term Dow Jones forecast still points to an eventual breakout above this key resistance zone.
Key Levels to Watch
In terms of key levels, the Dow’s repeated tests of the 45,000 threshold since November 2024 show just how critical this resistance level has become. The most recent attempt late last week came tantalizingly close to a clean break, only for the index to retreat before the close. Yet the pullback has been modest, suggesting that buyers remain firmly in control.
Key support levels to watch include 44,750, which has held so far this week, followed by 44,500 and 44,300. More importantly, the longer-term bullish outlook stays intact as long as the major support zone between 42,800 and 43,150 remains defended. This area is further reinforced by the 200-day moving average, adding technical weight to the argument that the path of least resistance remains upward.
In summary, while short-term volatility—particularly in tech—continues to make headlines, the Dow Jones appears well-positioned for an eventual breakout above 45K. A dovish tilt from Powell could be the catalyst that finally provides the bulls with the momentum they need.
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