Original article by James Stanley, DailyFX, as published on MENAFN.
Title: Market Analysis: Nasdaq 100 Slumps, EUR/USD Steadily Advances, WTI Crude Nears Technical Support
The global financial markets have been exhibiting significant shifts, with technology sector equities pulling back sharply, the euro strengthening against the dollar, and crude oil edging closer to technical support levels that could determine its next directional move. This article examines these key developments, focusing on the Nasdaq 100 index, the EUR/USD currency pair, and WTI crude oil prices.
Nasdaq 100 Pulls Back from Highs
The Nasdaq 100 index, which had been riding a bullish wave amid optimism over growth stocks and a dovish Federal Reserve, recently stumbled. After setting fresh all-time highs in previous sessions, the index has shown signs of exhaustion. Multiple indicators suggest that we may be witnessing early signs of a correction, or at the very least, a consolidation phase.
Key Notes on the Nasdaq 100:
– After setting a high near 11,070, the Nasdaq 100 reversed, plunging back below the 11,000 mark.
– This pullback comes after a recent parabolic advance through July, where the index moved up nearly 3,000 points from its mid-March lows.
– The quick ascent has created a stretched technical outlook that is now encountering overhead resistance.
– A principal concern lies in the rising wedge formation previously visible on the 4-hour chart. The wedge broke to the downside, undermining the bullish structure.
– Technical support levels are now in focus, with the zone around 10,600 gaining attention from traders. This area marked previous resistance levels and could serve as a floor.
– The RSI indicator has moved off overbought territory, potentially giving space for further declines without technical intervention.
– Investors are watching reactions around 10,600 and further down near the 10,230 level, which serves as another area of previous resistance-turned-support.
Equity markets, particularly the tech-heavy indexes like the Nasdaq, may be digesting a slew of factors including:
– Fiscal uncertainty in the United States as stimulus talks stall.
– Corporate earnings that have largely exceeded expectations, though some view them as already priced in.
– A general risk-off tone due to macroeconomic concerns and geopolitical tensions, particularly relating to US-China relations and the COVID-19 pandemic.
EUR/USD Extends Its Uptrend
Meanwhile, the euro continues its slow-but-consistent climb against the US dollar, with EUR/USD holding above the psychological 1.17 level. This trend underscores both relative eurozone stability and USD weakness, largely prompted by expanding US monetary and fiscal actions and an uncertain economic trajectory.
Highlights from the EUR/USD Pair:
– The pair has broken above the 1.1700 level and is now eyeing resistance near 1.1800. If it breaks above that, it would challenge the highs not seen since the fall of 2018.
– The bullish momentum can be largely attributed to Europe’s coordinated response to the coronavirus crisis, boosting investor confidence in the bloc’s stability.
– The European Central Bank has adopted a cautious, yet measured, stimulus strategy compared to the Federal Reserve, which has been more aggressive in expanding its balance sheet.
– German economic data has shown signs of recovery, adding further support to EUR strength.
– The USD, facing headwinds from low interest rates and the likelihood of further fiscal stimulus, remains under pressure relative to other currencies.
– EUR/USD price action remains comfortably above the 200-day moving average, further validating the bullish trend.
– If the pair pulls back, support is anticipated around 1.1610 and then lower at 1.1500, both of which could attract buyers during any short-term dips.
With this consistent move higher, Europe seems to have positioned itself as a relative safe haven amid broader economic disarray occurring in other major economies. The ECB’s marginally more conservative monetary approach seems
Read more on EUR/USD trading.