The more hawkish than expected revision to the FOMC Dot Plot last
week keeps on weighing on the Nasdaq Composite as the market might starting to
be worrying that the Fed could go further with its tightening cycle and
eventually lead to a recession. Fed Chair Powell has also
admitted that the soft-landing scenario is not his base case at the moment, despite
the good macroeconomic projections. Yesterday, we also got Fed’s Kashkari attributing
a 60% chance on the soft landing scenario, but a 40% chance on significant
hikes ahead. The rally in Treasury yields is also putting some pressure on the
Nasdaq Composite as financial conditions continue to tighten.

Nasdaq Composite Technical
Analysis – Daily Timeframe

On the daily chart, we can see that the Nasdaq
Composite is breaking out of the key support area
around the 13174 level defined by the trendline and the
38.2% Fibonacci retracement level.
This breakout opened the door for a much bigger fall into the next support
around the 12274 level. The buyers will want to see the price bouncing back
strongly above the support zone and leave behind a fakeout to start looking for
higher prices.

Nasdaq Composite Technical
Analysis – 4 hour Timeframe

On the 4
hour chart, we can see more closely the breakout with the price starting get a
bit overstretched on the downside as depicted by the distance from the blue 8 moving average. In such
instances, we can generally see a pullback into the moving average or some
consolidation before the next impulse.

Nasdaq Composite Technical
Analysis – 1 hour Timeframe

On the 1 hour chart, we can see that we
have a divergence with
the MACD right
when the price is breaking out. This is generally a sign of weakening momentum
often followed by pullbacks or reversals. In this case, we might see a pullback
into the downward trendline where we have also the confluence with
the 38.2% Fibonacci retracement level. That’s where the sellers are likely to
step in with a defined risk above the trendline to position for another
selloff. The buyers, on the other hand, will want to see the price breaking
above the trendline to confirm the fakeout and pile in to target the highs.

Upcoming
Events

Tomorrow we will see the latest US Jobless Claims
report. At the moment, it looks like bad data or good data all lead to further
downside as the former might point to a recession on the horizon and the latter
is likely to keep the Fed hawkish and even force to raise rates further.
Nonetheless, the last time we got weak data on the labour market front, the
Nasdaq Composite rallied strongly, so this is something to watch out for. On
Friday, we conclude the week with the latest US PCE data.

This article was written by FL Contributors at www.forexlive.com.

• Dollar keeps steadier in European trading
• Fed’s Kashkari: There is a risk that rates might have to go higher
• ECB’s Elderson: Interest rates have not necessarily peaked
• Eurozone August M3 money supply -1.3% vs -1.0% y/y expected
• Germany October GfK consumer sentiment -26.5 vs -26.0 expected
• France September consumer confidence 83 vs 84 expected
• Switzerland September Credit Suisse investor sentiment -27.6 vs -38.6 prior
• France prioritises inflation fight with 2024 budget bill
• China can still achieve economic growth of above 5% this year – PBOC advisor

Markets:

• USD leads, AUD lags on the day
• European equities mixed; S&P 500 futures up 0.4%
• US 10-year yields down 3.3 bps to 4.503%
• Gold down 0.5% to $1,891.72
• WTI crude up 1.5% to $91.77
• Bitcoin up 1.4% to $26,524

It was a quiet session again but the dollar continues to hold slightly firmer across the board, even with a light retreat in Treasury yields and a slight nudge higher in equities.

The greenback remains in the driver’s seat with EUR/USD at its lowest since March, down 0.3% to 1.0535. Meanwhile, USD/JPY is testing waters above 149.00 again as intervention fears are still in the back of traders‘ minds.

AUD/USD is the laggard, down 0.5% to 0.6367 at the lows for the day currently, not helped by the Australia CPI data earlier today. The flows are siding with the dollar, even as Treasury yields are not really extending higher on the day.

Yields are seemingly holding just at the highs so far this week but that is enough to keep broader markets on edge. Equities are able to find some relief today with US futures up 0.4%, although there is still the US session to go through.

In other markets, oil continues to shine with another 1% gain for WTI crude to rise above $91 while gold is dragged lower back under $1,900 amid a firmer dollar.

As we get into US trading in a bit, let’s see if the risk mood can hold up or will it turn again like it did yesterday.

This article was written by Justin Low at www.forexlive.com.

• Prior +5.4%
• Market index 189.6 vs 192.1 prior
• Purchase index 144.8 vs 147.0 prior
• Refinance index 411.7 vs 415.4 prior
• 30-year mortgage rate 7.41% vs 7.31% prior

Mortgage applications declined once again in the past week with both purchases and refinancing activity falling as the average rate of the most popular US home loan climbs up to 7.41% – its highest since December 2000.

This article was written by Justin Low at www.forexlive.com.

• We’re committed to 2% inflation
• There is a risk that rates might have to go higher but hard to know

This builds on his remarks from yesterday here where he touted that there is a chance for more „significant“ rate hikes.

This article was written by Justin Low at www.forexlive.com.

Even though Treasury yields are not making new highs today, gold is once again slumping as the dollar remains steady overall. Of note, price is dipping below $1,900 and that is starting to stir up some nerves among buyers surely.

The previous dip earlier this month was held at the $1,900 mark but with it potentially giving way today, it raises fresh concerns about gold’s recent resilience. The August lows around $1,885 will be the next big line in the sand to watch out for as a break there leaves little in the way of a steeper decline in gold.

The breakout in Treasury yields since last week is definitely a key trigger but the good thing for gold at least is that yields are not really racing higher in the past two days. 10-year yields in the US are still hovering around 4.50% to 4.55% and that is keeping broader market sentiment on edge, with gold being no exception to that.

Month-end and quarter-end flows could still muddy things up this week but in the bigger picture, if yields continue to stay higher, this little technical blip lower could end up being a key catalyst for the next correction lower in gold prices. Watch this space.

This article was written by Justin Low at www.forexlive.com.