The Nasdaq100 Futures (CME: NQ) are at a pivotal juncture this week, experiencing a notable 2.76% dip amidst evolving market dynamics. Despite having rebounded from this steep loss, the index futures are poised for their first weekly loss in five consecutive weeks, registering a week-to-date decline of 18 basis points.
This downturn comes amid concerns over hotter-than-expected inflation data, which has tempered expectations for imminent rate cuts. Traditionally, equities face challenges in gaining traction in environments characterized by higher interest rates as investors flock to the bond market for attractive yields. However, recent market movements have defied this trend, with upbeat earnings results and initial sentiment hinting at potential rate cuts driving equities higher. Notably, semiconductor firms led by industry titan NVIDIA Corporation (NASDAQ: NVDA) have been instrumental in propelling the index futures upward.
As inflation edged higher, reaching 3.1%, or 20 basis points above expectations, market participants reassessed the likelihood of a rate cut in May, with the probability decreasing to 35.2% from 52.2% just a week ago. Looking ahead, all eyes turn to the FOMC Minutes next week as traders seek insights into policymakers’ views on monetary policy and its potential impact on market sentiment and the ongoing rally.
Technical
The Nasdaq100 Futures market structure portrays a bullish trajectory, supported by robust technical indicators. Trading comfortably above the 100-day moving average, the futures exhibit a resilient uptrend characterized by an ascending channel pattern.
A notable support level emerged at 17221.50, corresponding with oversold RSI conditions and the moving average, sparking a rally and propelling the futures to establish new highs at 18121.50. However, the rally encountered selling pressures as overbought RSI conditions emerged, coinciding with higher-than-expected inflation data.
Subsequently, a retracement ensued, leading the futures toward the 61.80% Fibonacci Retracement Golden Ratio. Oversold RSI conditions at this level prompted a bullish reversal, indicating a potential upward momentum continuation. If bullish sentiment persists, a retest of the 18121.50 resistance level may be imminent. Conversely, should bearish pressures resurface, the 38.20% retracement level could serve as a critical point of interest to the downside.
Summary
Amidst evolving market dynamics and concerns over inflation, the Nasdaq100 Futures face a potential end to their five-week winning streak. Despite a resilient uptrend supported by robust technical indicators, the index futures encounter selling pressures, with a critical support level at 17221.50 and resistance at 18121.50.
Sources: CME, Reuters, TradingView
Piece Written By Nkosilathi Dube, Trive Financial Market Analyst
GBPUSD Rounds Off Busy Week
Throughout the week, the GBPUSD currency pair has navigated a turbulent market landscape, responding to a flurry of economic data releases that have influenced its trajectory. The catalyst for the initial movement was the release of US inflation figures, which exceeded expectations and consequently strengthened the dollar. However, this uptrend was short-lived as subsequent economic releases from both the US and UK offset each other’s impact.
In the US, retail sales figures for the month fell far below the consensus forecast of -0.1%, plummeting to -0.8% from the previous month’s 0.4%. Meanwhile, the UK reported a decline in GDP, with the quarter-on-quarter figure coming in at -0.3% compared to the previous -0.1%, contrary to expectations of no change. Similarly, the year-over-year GDP figure dropped to -0.2% from the previous 0.2%, further deviating from the expected 0.1% decrease.
However, the week’s drama did not end there. On Friday, the UK released its retail sales data, which exceeded expectations and injected fresh optimism into the currency pair. Year-over-year retail sales showed an unexpected increase of 0.7%, contrasting with the previous -2.4% and surpassing the anticipated -1.4%. Similarly, the month-on-month retail sales figure rose significantly to 3.4%, far exceeding the consensus forecast of 1.5% and marking a substantial improvement from the previous -3.3%.
As the week draws to a close, the question on everyone’s mind is whether the bullish momentum triggered by the latest data releases can be sustained. It’s been a week of ups and downs, but the story is far from over, and the currency pair’s future trajectory remains uncertain.
Technical
On the 4H chart, a descending triangle has emerged, with the price action forming three lower highs over recent weeks, suggesting that a bearish breakdown could be on the cards. The crossing of the 50-SMA (blue line) above the 25-SMA (green line) confirms the bearish tilt in the shorter term while offering strong resistance to the upside.
Support at 1.2581 is currently underpinning the price, which has recently tested the dynamic resistance of the triangle. If a breakdown occurs at this level, the price could trickle lower toward the triangle support at 1.2535, where the breakdown becomes possible. If the breakdown occurs, traders could look toward 1.2518 and 1.2505 as potential pivot points for a retracement, while neckline support is established at 1.2478 if the breakdown is sustained.
Conversely, if the bullish momentum pushes above the 25-SMA and 50-SMA, a breakout could occur to the upside of the triangle if the price can clear 1.2608. the Fibonacci midpoint, backed by the 100-SMA (orange line) at 1.2645, could be a level of interest in this case, as a retracement could be initiated here. However, if the bullish momentum continues, the price could test the 61.8% Fibonacci golden ratio at 1.2675.
Summary
It has been an eventful week for the GBPUSD currency pair, headlined by multiple pivotal data releases. However, a descending triangle has formed, opening the potential for a breakdown and a bearish trend formation if the price pulls back below support at 1.2581.
Sources: Koyfin, Tradingview, Reuters
Piece written by Tiaan van Aswegen, Trive Financial Market Analyst
