The Nasdaq100 Futures (CME: NQ) recently experienced a pullback after reaching an all-time high. Yesterday, it ended a two-day winning streak, declining by 73 basis points. This downturn reflects growing concerns over the timing and scale of the Federal Reserve’s anticipated interest rate cuts.
At the heart of investor apprehension is the U.S. Personal Consumption Expenditures (PCE) Price Index, the Fed’s preferred inflation measure, which will be under intense scrutiny. This indicator is set to influence U.S. monetary policy. Hawkish comments from central bankers have tempered expectations for rate cuts, with the CME FedWatch Tool now indicating only a 25 basis point reduction by November or December.
The evolving economic landscape and central bank signals are pivotal in shaping market sentiment and the direction of Nasdaq100 Futures. As traders closely monitor these developments, the interplay between inflation data and Federal Reserve policies will be critical in determining the market’s trajectory.
Technical
The Nasdaq100 Futures have been trading in a robust uptrend, above the 100-day moving average. An ascending channel pattern further validates this upward trajectory.
Despite this bullish backdrop, recent downside pressures have taken precedence, causing the index futures to trade lower and converge with the 100-day moving average. Support materialized at the 18,165.50 level, propelling the index futures higher as buyers flooded the market, pushing it to a new all-time high of 19,023.25. However, downside pressures emerged amid overbought Relative Strength Index (RSI) conditions at this peak, signalling a potential reversal.
Currently, the index futures are retracing, having reached the 38.20% Fibonacci Retracement level. Should downside pressures persist, the 50% retracement level could become a focal point of interest for traders. Conversely, the 19,023.25 resistance level could be retested if upside momentum resurfaces.
Summary
The Nasdaq100 Futures face critical junctures at 18,165.50 support and 19,023.25 resistance. Persistent downside pressure may target the 50% Fibonacci retracement level, while renewed buying interest could propel a retest of all-time highs. Economic indicators and Fed policies remain pivotal in shaping market direction.
Sources: Reuters, TradingView
Piece Written By Nkosilathi Dube, Trive Financial Market Analyst
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