Nasdaq 100 Capitulates as Risk-off Mood Weighs Markets and ECB Signals Hikes

Nasdaq 100, NDX, NQ1, USD, JPY, AUD, CAD, ECB, Fed, China – Talking Points

• The Nasdaq found initial support, but growth worries re-surfaced to undermine
• APAC equities movedlower, joined by commodities and associated currencies
• After market reporting caught traders off guard. Will Nasdaq see new lows?

The Nasdaq 100 was down over 1.5% in early Asian trade before clawing back some of the losses, but Wall Street futures remain in the red.

The Asian session was shaping up for another positive day after solid gains in European and US equities overnight. US President Joe Bidden intimated that Chinese tariffs might be reconsidered.

Then, after the close, Snap Inc. reported disappointing results and the risk-off tone promptly returned to markets.

The growth and commodity linked currencies of AUD, CAD, NOK and NZD gave up some of Monday’s gains. At the same time, the perceived havens currencies of CHF, JPY and USD were back in favour. Crude oil is slightly lower while gold has held steady.

The Euro held some traction to earlier gains in the aftermath of ECB President Christine Lagarde hinting that the bank could hike rates by 50 basis-points by September. This would effectively end their negative interest rate policy (NIRP) experiment of the modern era.

Federal Reserve Bank of Kansas City President Esther George backed up Fed Chair Powell’s comments last week, reiterating that she saw the target rate at 2% by August.

This implies two hikes of 50 basis-points. She also cited the monitoring of the rate of change of inflation for moves beyond that.

China lockdowns continue to dominate concerns for economic activity in the world’s second largest economy. Today, UBS and JP Morgan downgraded their outlook for growth there, adding to the risk-off sentiment.

There is a swathe of PMIs for developed markets today and then the US will see new home sales data. Comments from Fed Chair Jerome Powell will be crossing the wires.

The full economic calendar can be viewed here.

NASDAQ 100 Technical Analysis

The Nasdaq 100 index remains below a descending trend line and all short, medium and long term simple moving averages (SMA).

These SMAs all display negative gradients, suggesting that bearish momentum may still be evolving.

Support could be at the break point or recent low of 11689 and 11491 respectively. On the topside, resistance might be offered at previous highs and break point of 12578, 12709 and 13555.

Chart created in TradingView

— Written by Daniel McCarthy, Strategist for DailyFX.com

To contact Daniel, use the comments section below or @DanMcCathyFX on Twitter