The Nasdaq 100 Index (CME: NQ) faces conflicting forces after the Federal Open Market Committee (FOMC) meeting. The Fed unsurprisingly maintained interest rates, with Chair Powell downplaying the need for further hikes in the near term. This dovish stance initially lifted the index, but concerns about inflation and mixed economic data have dampened sentiment. A potential rate cut in September is now priced in by the market, highlighting the uncertainty surrounding the Fed’s future policy path.
Economic data remains a point of contention. While ADP’s non-farm payroll beat expectations, indicators like JOLTs job openings and ISM manufacturing PMI fell short. This mixed bag adds to the confusion, leaving investors unsure about the health of the US economy. Earnings from Apple, a heavyweight in the Nasdaq 100, are on tap and could significantly influence the index’s direction.
Technical Analysis
Technically, the index struggles for direction, trading below key moving averages on the 4-hour chart. The presence of bearish momentum, indicated by the downward position of the 20-SMA (green line), 50-SMA (blue line), and 100-SMA (orange line), suggests potential downside pressure. The flat RSI reading near 42 further reinforces this sentiment.
With the flat RSI trading below the 50.00 level, a sustained push lower could offer a potential for short-term trading towards the 17,313.75 support level in the coming sessions. A break below the 17,313.75 support level would leave the 17,113.25 support level as the next level of interest lower.
However, a push above the SMAs would leave the 17,799.75 resistance level as the initial level of interest higher. A push above the initial resistance level would bring the 18,052.00 resistance level into focus in the short term.
Summary
The Nasdaq 100 (NQ) finds itself at a crossroads. While the Fed’s dovish hints offered some support, ongoing inflation concerns and mixed economic data create uncertainty. Technically, the index is tilted towards the downside, but a break above resistance could trigger a reversal. The upcoming Non-Farm Payrolls report is a key event to watch, and a weak figure could exacerbate the current cautious sentiment.
Sources: TradingView, Trading Economics, Reuters, Federal Reserve, CNBC.
Piece written by Mfanafuthi Mhlongo, Trive Financial Market Analyst
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