Nasdaq 100 – Talking Points
- Nasdaq 100 fails again at 11700 threshold
- US Dollar, Treasuries bid in flight to quality
- Recession fears prompt probe of earnings estimates
Risk assets declined following the long weekend in the US as global recession fears drove a risk-off tone during Tuesday’s session. Strong moves overnight across FX markets bled into US equities, with the Nasdaq 100 pulling back almost 2% ahead of the opening bell. Despite closing higher on Friday, resumption of trading in New York saw traders renew fears over contractions in global growth.
Weak data from the Eurozone further highlights the growth slowdown narrative, as European equities and EURUSD remain under significant pressure. Despite lower US Treasury yields, risk struggled following the opening bell as market participants flocked to safe haven assets. With EURUSD trading below 1.03, the US Dollar Index was able to stretch to 106.50.
Traders will look to Friday’s Nonfarm Payrolls report for insight into where the US economy stands, as many wonder how the Fed will balance both sides of its mandate in the race to combat record-high inflation. Wednesday sees the release of the FOMC meeting minutes, which may offer some insight into the future path of Fed policy. With tighter financial conditions and slower global growth seeming inevitable, Nasdaq 100 stocks may continue to bear the brunt of the decline(s) seen in risk assets. Strategists across Wall Street remain constructive, with many having yet to revise earnings estimates for 2H 2022 lower. For now, it seems that a stark split has emerged between equity bulls and bears.
Nasdaq 100 4 Hour Chart
Chart created with TradingView
Nasdaq 100 futures (NQ) have largely been in a “sell the rally” environment for much of the last few months, as sentiment remains weak around all assets. Despite the brief rally beyond 12000 and corresponding fade, 11700 largely remains the level to break to push higher. This level held price in during the overnight session, and continued rejection may signal that higher prices may nor be in store. Downside support may be found at 11300, but if that level should fail given the mounting bearish pressures, fresh yearly lows may be found below 11068.50.
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— Written by Brendan Fagan, Intern
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