US major stock indexes rallied overnight, breaking a three-session losing streak as investors eagerly await June US consumer inflation report, expected later today. Economists forecast a moderation in headline CPI from 4.0% to 3.1%, with core CPI also expected to decelerate from 5.3% to 5.0%.
Market participants have already factored in a quarter-point hike at Fed’s July 25-26 meeting, with an over 90% likelihood priced in. As it stands, the probability of an additional rate hike for the remaining part of the year is below 50%. These odds could shift depending on whether today’s core CPI data undershoots, and by what margin.
As for DOW, the strong support from 55 D EMA (now at 33724.42) is clearly a near term bullish sign. Break of 34588.68 resistance will confirm resumption of recent rally. But the real test would lie in 61.8% projection of 28660.94 to 34712.28 from 31429.82 at 35169.54. Clear break of this projection level is needed to set the stage for further rally in the rest of H2. Meanwhile, a dip today or in the near term wouldn’t be disastrous as long as 32586.66 support stays intact.