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The Nasdaq100 plunged by -0.75% to the end of the week as the dollar recovered ground following Fed Hawkishness. Tech stocks largely weighed down the Nasdaq index as investors worry that a stronger dollar could make American products less competitive on the global market. The US PCE data is an inflation indicator that will guide the Fed on its tightening path this Friday. Currently, the FOMC members have doubled down on further tightening to bring inflation normalization.
The US10-year yields rose by +0.70% on Friday despite mixed economic data from the US. Initial Jobless Claims dropped to 192K from the 200K forecasted suggesting a tight labour market, while Fed meeting minutes pointed towards further tightening. The yields are currently trading above a 16-week high at 3.90% and a break above that level could extend Nasdaq100 losses towards the 11850 near-term support.
However, the dollar remains susceptible to pullbacks as US GDP data missed estimates while US Housing data continues to fall. The US GDP QoQ Q4 data fell to 2.7% vs 2.9% surveyed while Existing Home Sales in January dropped to 4.00M vs 4.10M forecasted. The focus shifts to US PCE reports and FOMC Member Meister.
Weekly Chart Analysis
The Nasdaq100 is currently in a corrective pattern since January, after bouncing off the 10650 support level. The William’s Alligator indicates that the index could experience further upside momentum following a breach to the upside of the (21,13,8) Moving averages used as dynamic support and resistance levels. Bulls could extend their targets towards the 13650 if the 12800 level is breached. The RSI indicator broke above the 50.00 level suggesting further upside movement could be expected in the near term.
However, a failure to hold on to gains above the 11850 level could trigger selling pressure towards the 10650 level, a 2years 5months low. The 12800 remains a near-term resistance for bulls as it coincides with a 0.382% Fibonacci Retracement level, and traders should closely watch what happens at the 11850 near-term support level.
The ActivTrader Sentiment tool suggests that 60% of retail traders are bullish on the Nasdaq100 index. This is influenced by weakening sentiment of Fed tightening as US GDP QoQ Q4 preliminary data missed estimates along with weakening housing data released earlier this week. Moreso, the focus remains on the release of the US PCE report, which the fed uses as a foundational inflation gauge. The dollar could experience selling pressure if data comes as expected as it deepens recession fears.
However, retail Traders’ bullishness could be limited by dollar strength due to rising geopolitical tensions and seasonal shifts. The war in Ukraine continues to plague economic performance as an atmosphere of war triggers risk aversion. Furthermore, a tight labour market still gives room for further tightening by the Fed.
Daily chart Analysis
The Nasdaq100 has shaded off a majority of its monthly gains as bulls struggle to hold gains above the 11850 level. The 12800 level remains a near-term resistance and a breach below the 11850 could trigger further downward pressure towards the 10650 level, a yearly low. The bias has turned bearish as suggested by the MACD indicator. The Volume Bars breached the 0.000 benchmark level into a negative territory indicating the indices could trade lower in the near term.
However, a hold above the 11850 could give bulls another rally towards the 12800 near-term resistance. The Nasdaq100 index is currently trading above a critical support level, coinciding with a 50-day and 200-day moving average. A break above the 12800 could reinforce bullish strength towards the 13700 level, a 9-month high.
