Normally, the last week of the month can be quite dull but this is not the case for September! Volatility remained high throughout Monday and this morning’s Asian session with the US Dollar dominating the charts again. The markets were mainly focused on speeches from the European Central Bank and the Federal Reserve.
EUR/USD
The EUR/USD, which is the most traded currency pair worldwide, declined for a fifth day, but has found some support at the 0.9547 level. The support point is the new price low and is likely to be a significant psychological price for the market. Currently, the price is increasing in value but remains below previous wave highs. Analysts believe the price may potentially be oversold below the 0.9547, but at the same time there is not much pushing the Euro higher this week. That means price analysis will be key. Currently, the price is trading at the 25-day trendline which previously acted as a resistance point.
EUR/USD 1-hour chart on September 27th
As expected, the far right political group, Brothers of Italy, has won the Italian parliamentary elections, and its leader Giorgia Meloni will soon become the country’s new prime minister. Experts expect the new government will start cutting taxes to support economic growth, which will lead to a new increase in the budget deficit, which may violate Eurozone budget rules and complicate relations between Rome and Brussels.
We have already seen that tax cuts in the UK have significantly damaged the Pound. Will we see something similar with the Euro? Italy does not play as much an important role as the French and German economies do. Nonetheless, Italy is the Eurozone’s third largest economy and may influence the price of the Euro.
Yesterday evening, investors also turned their attention to an interview with Fed member Rafael Bostic. He reaffirmed the regulator’s commitment to increase interest rates in order to combat the current high inflation levels, but admitted that this could lead to a slight decrease in the number of jobs in the country. The governor also added that he sees positive dynamics in the US economy and that it will be able to withstand the negative consequences of further monetary policy tightening.
NASDAQ
NASDAQ formed its fifth bearish candlestick and is clearly correlated with the US Dollar at the moment. Though it should be noted that even though the index ended lower than the open price, it did not decline to a new price low.
NASDAQ 1-hour chart on September 27th
If we look at the futures market, we can see that NASDAQ has actually increased in value considerably pre-market open. The index has increased by 1.26% during this morning’s Asian session, which brings the price closer to yesterday’s resistance point. Traders will be monitoring if the lower price has triggered a surge in buyers and if the price can form a bullish breakout at $11,464. Alternatively this may be a retracement in the longer term downward trend.
The component which saw the largest decline in NASDAQ was Charter Communications Inc, which declined by 4.81%. On the other hand, the largest increase was seen with Costco Wholesale Corp which increased by 2.98%. However, even if the price does increase in value, traders need to keep in mind the longer term pressure which is being applied by the Fed’s monetary policy.
Quick Summary:
- EUR/USD finds support but can the Euro regain some lost ground?
- Italy’s far right political party wins elections, tax cuts and tensions with the EU are likely to follow.
- NASDAQ declines for a fifth day but rises pre-market.
- Fed member, Mr. Bostic, remains hawkish for the near term future.