- Nasdaq priced higher as Fed slowdown looms
- Investors expect to see lower inflation
- The Fed is expected to downshift
US equities rallied yesterday as expected. Tech stocks have been undervalued but now with Fed slowing down and possibly pausing the hikes within the next 12 months the value of their future cash flows has increased. All in all, the themes the markets focus on remained the same: Lower inflation and smaller rate hikes from the Fed.
Gold continued higher but still trades inside a wedge while commodity currencies AUD and NZD continue to rally against the USD. This suggests investors are still bullish about the impact of China’s economy rebounding after the lockdowns. The German and UK PMIs have come in mixed this morning and at the time of writing there has been no major market reactions to the data releases. The next key risk events include the US PMI numbers, the Richmond Manufacturing Index and then tomorrow in the Asian session the CPI numbers from New Zealand.
Traders took profits in DJ below a resistance area
DJ hit some supply yesterday after a rally. The selling came in below a resistance area (33 800 – 33 880). The upside could be getting limited. But if the bulls defend levels above 33 480 then there’s hope for the bull run continuing today. Otherwise, we might see the index trading down to 33 300 or so.
Nasdaq benefits from the Fed slowdown
NAS is bullish above 11 800. Below the level, the market probably trades down to 11 690 or so. Nasdaq rallied almost to 11 950 yesterday but profit-taking came in at levels slightly below it. Out of the main US indices, Nasdaq is the one that’s benefitting the most from the Fed slowing down the hikes.
The cost of financing impacts the cash flow values in growth companies quite a bit so technology stocks are sensitive to changes in the interest environment. Therefore, if no major changes happen investors are likely to be buyers when the market dips.
Gold trades at top of the wedge
Gold traded to the wedge top this morning. The market is still pushing higher and remains in an uptrend above 1896. Below the level, the next stop is probably at 1866 but as long as the market keeps on making higher lows above 1896 the green team is in control.
A decisive penetration of the 1911 low would probably take the market down to 1896. Note that a failure to penetrate the wedge high would increase the probability of 1911 support breaking.
EURUSD strong after the German PMIs
EURUSD is bullish above 1.0826 (the low of a minor bull channel. If the level breaks the market probably trades down to 1.0766. The German PMIs sent a mixed message to the markets and failed to significantly move the EURUSD pair. German Flash Manufacturing PMI came in at 47 vs. 48 expected and the German Flash Services PMI was confirmed at 50.4 vs. 49.6 expected.
The Next Main Risk Events
- USD Flash Services PMI
- USD Flash Manufacturing PMI
- USD Richmond Manufacturing Index
- NZD CPI
- AUD CPI
- EUR German IFO Business Climate
- CAD BOC Monetary Policy Report
- CAD BOC Rate Statement
- CAD Overnight Rate
- CAD BOC Press Conference
- USD Advance GDP
- USD Core Durable Goods Orders
- USD Durable Goods Orders
- USD Unemployment Claims
- USD New Home Sales
- USD Core PCE Price Index
- USD Pending Home Sales
- USD Revised UoM Consumer Sentiment
For more information and details see the TIOmarkets economic calendar.
Trade Safe!
Janne Muta
Chief Market Analyst
TIOmarkets.com
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