NASDAQ Peaks Yet Again, But Can the Momentum Sustain?

The price of the US Dollar Index fell below 104.00 on Monday but remains significantly higher than Friday’s lows. The cost of the Dollar continues to be primarily influenced by the possibility of another 25 basis point hike. Economists are currently split on whether the central bank will raise the Federal Fund Rate. The latest employment data indicates a strong employment sector with more employed individuals and job vacancies. The data points towards another hike. However, many economists still believe the Fed will “pause” unless the inflation data is higher than predicted. 

Many economists advise the Federal Reserve is likely to pause in June but hike in July if data doesn't indicate a slowdown. Nonetheless, the Non-Farm Payroll, more than 145,000 than expected, has supported the Dollar. Other central banks, including the European Central Bank and the Bank of England, also indicate higher interest rates. This morning, the Reserve Bank of Australia raised interest rates to 4.1%, whereas investors expected a pause. The Australian Dollar responded with a 1% climb. 

NASDAQ Peaks, but Is the Momentum Sustainable?

The best-performing index of 2023, the NASDAQ, again rose to a new high during yesterday’s trading session. The NASDAQ rose to $14,664, a 34% rise in 2023. However, investors should note that the index continues to collapse each time investors push the price higher. This indicates that demand is high, but investors are uncomfortable buying at such a high price, which is a psychological barrier. 

NASDAQ 1-Hour Chart on June 6th

NASDAQ investors are currently evaluating the latest product release from Apple. Apple’s new product, the “Vision Pro Headset," is similar to a virtual reality headset but has more features. At first, the stock rose in value as the product received positive feedback and reviews. However, many Wall Street analysts voiced concern over the price tag, and the stock soon fell by 3.75%. According to some analysts, the new product will be priced at $3499, which is not likely to improve company profits at such a high price significantly. 

Bank of America Global Research yesterday reported investors poured over $8.5 billion into the market during the previous week’s trading. The most significant interest still seems in the stocks of technology companies, mainly Nvidia, Apple, and Microsoft, which are receiving positive ratings amid growing demand for artificial intelligence technology. 

The price of the NASDAQ continues to obtain bullish signals from technical analysis similar to the previous 2-weeks. The main difference technical analysts noted is the impulse wave's momentum and size. Previous impulse waves in May measured 2.70% on average. However, the impulse wave over the past week counts 1.25%, which is significantly lower. This can also be seen in the Relative Strength Index, which forms a divergence signal. However, for a strong bearish signal, traders will wait for the price to decline below $14,206. 

EUR/USD - PMI Data Pressures the Dollar

The EUR/USD increased in value this morning but remains lower than the swing high from June 2nd. The price has now formed a “head and shoulder” pattern on the 4-Hour timeframe, indicating an upward price movement. In addition, the largest impulse wave during this previous week was in favour of the Euro. However, analysts are still cautious that the Euro has significantly depreciated against most market participants, and the Dollar could regain momentum if inflationary pressures continue. 

EurUsd 3-Hour Chart on June 6th

The latest price driver was yesterday’s ISM Services PMI, which declined to 50.3. The economic data pressured the Dollar as the figure was lower than 52.6, which analysts expected, and was the lowest in 5 months. However, the survey index remains above 50.00, which indicates economic growth. However, the main price driver for the Dollar will likely be next week’s Consumer Price Index. The CPI data is likely to be the deciding factor for the FOMC’s rate decision. 

Conversely, the Euro has recently been under pressure from a significant decline in inflation. Many investors took this as a sign that the European Central Bank will become increasingly dovish in the coming months. However, the Euro has slightly improved this week as the European Central Bank’s President advises inflationary pressures remain and the regulator will continue to hike. Hawkish comments also came from the Bundesbank President, Mr. Nagel, who suggested that more than one hike will be required this year. 

Summary:

•  The NASDAQ rose to $14,664, measuring a 34% rise in 2023 so far, but continues to decline after each new high. 
• Bank of America yesterday reported investors poured over $8.5 billion into the market and mainly the technology market. 
• The Dollar recently came under pressure from the latest ISM Services PMI, which dropped to a 5-month low. 
• the Euro has improved this week as the ECB’s President advises the regulator will continue to hike. 
• The Bundesbank President, Mr. Nagel, also suggested that more than one hike will be required this year.