In the early hours of Tuesday’s trading session, the Nasdaq100 Futures (CME: NQ) experienced a downturn, shedding up to 59 basis points. This abrupt reversal threatens to conclude a six-day rally, reflecting a shift in market sentiment.
Responding to hawkish comments from European Central Bank officials resisting immediate rate cuts due to inflation concerns, traders recalibrated their expectations for a Federal Reserve rate cut. The probability of a rate cut in March dipped from 76.9% to 66.3% within a day.
This tug-of-war between monetary policy expectations and global economic conditions has not only impacted the index futures but also triggered a boost in the Greenback, exerting pressure on equities. As the week progresses, traders eagerly anticipate insights from Federal Reserve officials’ speeches, coupled with crucial U.S. retail sales and jobless claims data.
Technical
As 2024 commenced, the Nasdaq100 Futures navigated a turbulent path, breaking below the 100-day moving average after a swift December surge.
A robust resistance level emerged at 17165.25, driven by overbought conditions in the Relative Strength Index (RSI). Despite a subsequent descent through crucial Fibonacci Retracement levels, a saving grace emerged just above the 61.80% Golden Ratio amid oversold RSI conditions. This pivotal juncture sparked a significant shift, preventing a sustained move toward support at 15792.50, a noteworthy level formed from the December 2023 rally.
The Golden Ratio marked a turning point as buyers took charge, fuelling a bullish trend that lifted the index above the 100-day moving average. The prevailing bullish momentum suggests a potential retest of the 17165.25 resistance level. Conversely, a dip below the 100-day moving average could indicate downside pressures, potentially guiding the index toward the 50% level—an essential focal point if bearish sentiment gains traction.
Summary
The Nasdaq100 Futures faced headwinds in the Asian session, marking a potential pause in its six-day rally. Hawkish comments from European Central Bank officials triggered a swift recalibration of expectations for a Federal Reserve rate cut, impacting not only the index but also strengthening the Greenback. As traders await key economic data, the delicate interplay of monetary policy expectations and upcoming economic data unfolds.
Sources: Reuters, TradingView
Piece Written By Nkosilathi Dube, Trive Financial Market Analyst
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