As mentioned last Friday, all eyes will be on next week’s inflation figures which will determine how the Central bank proceeds. However, investors will also evaluate this Friday’s US employment figures, and the imbalance experienced within the employment sector. The price movement on the Stock market and the Dollar will largely depend on whether the Fed hike 25 or 50 basis points. In addition, investors will monitor if the Federal Reserve’s Terminal Rate will increase up to 6%.
NASDAQ - Investors Eye Federal Reserve Chairman's Testimony for Policy Clues
The NASDAQ had significantly increased in value on Friday, returning the price to a significant price level. The price has acted as a support level throughout February but has not been flipped onto a resistance level. Most analysts have advised the growth may be related to investors looking to take advantage of the discounted price and the resilient economy. However, a terminal rate of 6% can put even the strongest of economies to the test.
During this morning’s Asian Session, the price increased and moved higher than Friday’s close. As mentioned, the price has moved above the resistance level, and the impulse wave measures 4%. Therefore investors are cautious and anticipate a retracement soon.
In technical analysis, the price only indicates a retracement on smaller timeframes, but larger timeframes still point towards an upward trend. The only longer-term indication of a downward trend is the three lower highs and two lower lows formed over the past month. The Parabolic SAR also indicates a downward price trend, but traders will be looking for the price to gain momentum to finalise the price movement.
As mentioned above, the resilient economy experienced in 2023 has continued into the last week. On Friday afternoon, The Institution of Supply Management released the US Services Purchasing Managers’ Index, expected to decline to 54.5 but read 55.1, which is exceptionally higher. Positive economic data can be viewed as both positive and negative. Positive economic data is good news for the economy and the world’s largest companies. However, at the moment, strong economic data also points towards higher interest rates. Higher interest rates result in less consumer spending, lower dividends, and an increased cost of debt.
No major economic data is expected to be released during this afternoon’s US Trading Session. For this reason, traders will focus on price action to determine their trades. However, tomorrow will be the first time in almost 2-weeks that the Chairman of the Federal Reserve will speak at the annual monetary policy report. Investors will look for comments on the next hike and expected terminal rate. Mr. Jerome Powells will testify on Wednesday after the US release of the JOLTS Job Openings for February.
EUR/USD
The EUR/USD during this morning’s Asian and European sessions has traded higher than the market open but has shown some signs of Dollar strength. The US Dollar Index has remained at 104.55, slightly above the market open price. Therefore we can see that the increase in the exchange rate price is largely related to the Euro and not the Dollar. The Euro has increased in value against the Pound, Yen, Dollar, and Swiss Franc.
We can see both positive and negative indications in terms of technical analysis. The moving averages on most timeframes have crossed over upwards, which can provide indications of possible bullish price movement. The Stochastic oscillator has also pointed upwards but is showing a slight divergence. Another key signal is that the EUR/USD has formed a “head and shoulder” pattern which is also known to point toward downward price movement potentially.
The Euro, similar to the US Dollar, is supported by unexpected economic growth. Service PMI of the Eurozone countries rose from 50.8 points to 52.7. The index for Germany slightly increased from 50.7 points to 50.9 points.
Summary:
- The NASDAQ climbs as investors take advantage of the discounted price and as sentiment grows based on a resilient economy.
- Both EU and US economic figures significantly improve, but economists tread cautiously as the terminal rate is likely to rise.
- The Euro has increased in value against the Pound, Yen, US Dollar, and Swiss Franc.
- The NASDAQ significantly rises, but traders question if the bullish price movement can continue even if rates continue to rise.
