Nasdaq consolidates as traders await a key US CPI report ahead of Jackson Hole Symposium
FUNDAMENTAL
OVERVIEW
The strong rally in the Nasdaq has stalled last Wednesday as the US-Iran
deal failed to materialise within the expected timeline. Since then, the price
action has been mostly rangebound with just the softer than expected NFP reportproviding some support.
The data triggered a dovish repricing in interest rate expectations, with
the probability of a September rate hike falling to 38%, compared with 54%
before the release. Despite that, the probabilities of a September hike rose
back to 50%.
The reason for this whipsaw in expectations is that there was a significant
loss of government jobs, which made the report look much softer than it
actually was. In fact, the unemployment rate painted a different picture,
falling further to 4.1%. Overall, the labour market remains on a better
trajectory than it has been over the past three years.
Today, we have the US CPI report. The data will be critical for the
September FOMC decision and Fed Chair Warsh’s speech at the Jackson Hole
symposium. The focus will be on the Core CPI M/M measure which is expected at
0.2%.
A hot report will likely trigger a selloff in the short-term, with traders increasing
rate hike bets. A soft or even in-line report, on the other hand, should reduce
further the risk of Fed tightening and give the Nasdaq another boost.
NASDAQ TECHNICAL
ANALYSIS – DAILY TIMEFRAME
On
the daily chart, we can see the Nasdaq is consolidating below the key swing level at 30,065. That’s
where the sellers are stepping in with a defined risk above the level to
position for a drop into the 26,300 support. The buyers, on the other hand,
will want to see the price breaking higher to increase the bullish bets into new
record highs.
NASDAQ TECHNICAL
ANALYSIS – 4 HOUR TIMEFRAME
On
the 4 hour chart, we can see the
recent price action formed a symmetrical triangle. The price can break on
either side but follows next is generally a more sustained trend. The buyers
will continue to lean on the bottom trendline to keep targeting an upside
breakout, while the sellers will lean on the top trendline to position for a downside
break.
NASDAQ TECHNICAL
ANALYSIS – 1 HOUR TIMEFRAME
On the 1 hour chart, there’s
not much we can add here as traders will likely wait for the US CPI release to
start taking positions. The red lines
define average daily range for today.
UPCOMING CATALYSTS
Today, we have the US
CPI report. Tomorrow, we get the US PPI data and the latest US Jobless Claims
figures. On Friday, we conclude the week with the US Retail Sales and the
University of Michigan Consumer Sentiment report.
This article was written by Giuseppe Dellamotta at investinglive.com.