Dow Jones Industrial Average melts upward as markets await US-China trade agreements

The Dow Jones pushed closer to 43,000 as investors await a resolution to US-China trade tensions.
Key US inflation data due this week, beginning with US CPI inflation figures on Wednesday.
Inflation expectations have tempered recently, but market forecasters are still bracing for tariff impacts.

Joshua Gibson FXStreet

The Dow Jones Industrial Average (DJIA) rose on Monday, testing above 42,800 as ongoing trade talks between the Trump team and Chinese representatives are ongoing in London. Equity markets are ‘melting up’ as investors await signs that Trump and China’s Xi Jinping will find a workaround to accelerationist trade war rhetoric that has gripped markets in a sentiment tug of war ever since the Trump administration announced a widespread package of “reciprocal tariffs” in early April.

According to reporting, President Donald Trump gave his negotiation team in London permission to explore lifting trade restrictions on tech exports to China as a potential bargaining chip. Whether or not the move will have a material impact on trade talks with China remains to be seen. Trump’s newest tech export restrictions on China, intended to curb Chinese access to technology necessary for building AI modeling machines, were introduced after the two countries had already begun trade talks.

Inflation data looms large in the week ahead

May’s Consumer Price Index (CPI) inflation figures, due on Wednesday, will kick off a raft of price volatility measures being released this week. Near-term CPI inflation is expected to tick higher as whiplash tariff policies that were announced, canceled, reinstated, and changed at the beginning of the second quarter are expected to begin having an increasing impact on inflation data in the coming months. Core annualized CPI inflation is expected to tick up to 2.9% YoY from 2.8%, well above the upper band of the Federal Reserve’s (Fed) 2% annual target.

The New York Fed’s latest survey of consumer expectations showed that consumer inflation fears are beginning to temper: the latest survey data showed the median consumer expected 1-year inflation to land somewhere near 3.2%, versus the previous 3.63%. However, the University of Michigan’s (UoM) Consumer Inflation Expectations survey results, slated to be released this Friday, will serve as the key sentiment print this week.

Dow Jones price forecast

The Dow Jones Industrial Average (DJIA) continues to push into the top end of recent consolidation, inching toward a near-term technical ceiling at the 43,000 major price handle. Price action remains on the high side of the 200-day Exponential Moving Average (EMA) near 41,650. Bullish momentum could see a pause for breathing room as technical oscillators tilt into overbought territory.

Dow Jones daily chart

Economic Indicator

Consumer Price Index (YoY)

Inflationary or deflationary tendencies are measured by periodically summing the prices of a basket of representative goods and services and presenting the data as The Consumer Price Index (CPI). CPI data is compiled on a monthly basis and released by the US Department of Labor Statistics. The YoY reading compares the prices of goods in the reference month to the same month a year earlier.The CPI is a key indicator to measure inflation and changes in purchasing trends. Generally speaking, a high reading is seen as bullish for the US Dollar (USD), while a low reading is seen as bearish.

Why it matters to traders?

The US Federal Reserve (Fed) has a dual mandate of maintaining price stability and maximum employment. According to such mandate, inflation should be at around 2% YoY and has become the weakest pillar of the central bank’s directive ever since the world suffered a pandemic, which extends to these days. Price pressures keep rising amid supply-chain issues and bottlenecks, with the Consumer Price Index (CPI) hanging at multi-decade highs. The Fed has already taken measures to tame inflation and is expected to maintain an aggressive stance in the foreseeable future.

Author

Joshua Gibson

FXStreet

Joshua joins the FXStreet team as an Economics and Finance double major from Vancouver Island University with twelve years' experience as an independent trader focusing on technical analysis.

Markets move fast. We move first.

Orange Juice Newsletter brings you expert driven insights - not headlines. Every day on your inbox.

Editor's Picks

EUR/USD struggles for direction amid USD gains

EUR/USD is trimming part of its earlier gains, coming under some mild downside pressure near 1.1730 as the US Dollar edges higher. Markets are still digesting the Fed’s latest rate decision, while also looking ahead to more commentary from Fed officials in the sessions ahead.

GBP/USD drops to daily lows near 1.3360

Disappointing UK data weighed on the Sterling towards the end of the week, triggering a pullback in GBP/USD to fresh daily lows near 1.3360. Looking ahead, the next key event across the Channel is the BoE meeting on December 18.

Gold losses momentum, challenges $4,300

Gold now gives away some gains and disputes the key $4,300 zone per troy ounce following earlier multi-week highs. The move is being driven by expectations that the Fed will deliver further rate cuts next year, with the yellow metal climbing despite a firmer Greenback and rising US Treasury yields across the board.

Litecoin Price Forecast: LTC struggles to extend gains, bullish bets at risk

Litecoin (LTC) price steadies above $80 at press time on Friday, following a reversal from the $87 resistance level on Wednesday. Derivatives data suggests a bullish positional buildup while the LTC futures Open Interest declines, flashing a long squeeze risk.

Big week ends with big doubts

The S&P 500 continued to push higher yesterday as the US 2-year yield wavered around the 3.50% mark following a Federal Reserve (Fed) rate cut earlier this week that was ultimately perceived as not that hawkish after all. The cut is especially boosting the non-tech pockets of the market.

Aave Price Forecast: AAVE primed for breakout as bullish signals strengthen

Aave (AAVE) price is trading above $204 at the time of writing on Friday and approaching the upper boundary of its descending parallel channel; a breakout from this structure would favor the bulls.