The Fed Remains Dovish and the NASDAQ Attempts a Full Correction

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  • The NASDAQ rises 0.95% and continues to attempt a full price correction during this morning’s Asian session.
  • The UK economy shrunk 0.1% in the latest month according to the latest Gross Domestic Product. The GDP figure was higher than expectations but still recorded an economic contraction.
  • The UK Prelim 3-Month GDP figure read a negative -0.3%, the largest decline since May 2021.
  • Gold continues to trade at a two-month low and is likely to remain under pressure if tomorrow’s Producer inflation, similar to Consumer inflation, reads higher than expectations.

USA100 – Fed Members Remain Optimistic Regarding Inflation!

The USA100 has again crossed above the 75-Bar EMA and above the “neutral” within the RSI. The asset is also forming its third “higher high” which also indicates a potential bullish trend. Technical analysts point out that both oscillators and trend indicators are pointing to a higher price target. So why is the asset increasing in value?

As mentioned throughout the week, the inflation rate will be unable to maintain a longer-term downward trend unless it becomes significantly higher than expectations. Analysts expected inflation to decline from 3.4% to 2.9%, but 3.1% is still considered a reasonable fall. In addition to this, inflation elsewhere also fell, which improved investor sentiment. Therefore, investors took the lower price as an opportunity to enter at a lower entry point. In addition to this, investor’s concerns were eased by members of the Federal Reserve including Mr Michael Bar and Mr Goolsbee. Both members said to the public that the path to the 2% target will be bumpy, but nonetheless, inflation is on its way down.

Moving away from past economic data, the index was supported by the Quarterly Earnings Report from Cisco. Cisco’s quarterly earnings report, made public early this morning, beat earnings and revenue expectations. The company’s earnings per share were 3.80%, higher than expectations, but the stock fell 5% after market close. The decline was mainly due to poor expectations for the coming quarters. Investors now turn their attention to Applied Materials which will release their earnings tonight.

The best performing stocks within the index were Illumina (+5.23%) and Netflix (+4.47%). The worst performing stocks were Kraft Heinz, Biogen Charter Communications and Airbnb. 78% of the index ended the day higher and 28% rose more than 2% in the session. The next price drivers will be this afternoon’s Retail Sales data, Unemployment Claims and Empire State Manufacturing index. Ideally investors will want to see data read as expectations or slightly higher, but not high enough to make the Fed feel at ease about the restrictiveness of the monetary policy.

EURUSD – EU Economy Still At Risk of Recession!

Over the past 24-hours, the European economic performance in the fourth quarter was published and met analysts’ expectations: the figure remained at 0.0% and increased by only 0.1% YoY. The leading economy in the Eurozone, Germany, shrank by 0.3%, the Italian one grew by 0.2%, and the French economy remained unchanged: the region managed to avoid a recession but the possibility of its occurrence this year remains.

Nonetheless, this does not necessarily mean the Euro will significantly decline, and its vital investors are also evaluating the price action and technical analysis. The Euro has slightly gained against the Dollar, and  technical analysts point to the fact the upward price movement is quite weak this morning and weaker than the day before. The Euro is also declining against the Swiss Franc, Japanese Yen and Australian Dollar. Therefore, the Euro is also not witnessing strong bullish price action elsewhere.

However, sell signals on the EURUSD are not likely to materialize unless the US Dollar Index starts to rise again. The index is at its highest price since November 2023, but has fallen over the past 2 days. If today’s US data read higher, the Dollar can again rise further. The US awaits the Retail Sales, Core Retail Sales, Empire State Manufacturing Index and the Weekly Unemployment Claims.

Michalis Efthymiou

Market Analyst

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