Last Friday, the NFP report beat expectations across the board with the unemployment rate falling to 3.7% vs. 3.9% previously and the average hourly earnings on a monthly basis higher than expected at 0.4%. The jobs data was followed by a strong University of Michigan Consumer Sentiment survey where inflation expectations fell much more than expected.
Overall, it was a good day for those in the soft-landing camp, but it also raised the risk of a hawkish FOMC rate decision on Wednesday as the Fed might push against rate cuts expectations more strongly. The Nasdaq Composite continues to consolidate at the highs as there might not be that much of an incentive to keep pushing ahead of this week's risk events.
Nasdaq Composite Technical Analysis – Daily Timeframe
On the daily chart, we can see that the Nasdaq Composite rallied back to the cycle high following the strong economic data last Friday which supported the soft-landing narrative. The sellers are likely to step in here with a defined risk above the cycle high to position for a drop into the 13700 support zone where we can also find the 38.2% Fibonacci retracement level for confluence.
Nasdaq Composite Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that the price has been diverging with the MACD into the cycle high. This is generally a sign of weakening momentum often followed by pullbacks or reversals. This might be another bearish confluence for the sellers with the first target standing around the recent lows at 14050. The buyers, on the other hand, will want to break decisively higher to invalidate the bearish setup and extend to new highs.
Nasdaq Composite Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see more closely the rangebound price action between the cycle high and the minor support around the 14050 level. This range will likely be key now as a break to the upside should lead to a rally while a break to the downside should trigger a selloff into the 13700 support.
Upcoming Events
This week is going to be a big one with the US CPI and the FOMC rate decision on the agenda. We begin tomorrow with the release of the US CPI report where the market will want to see how the disinflationary trend is going. On Wednesday, we have the US PPI data followed by the FOMC rate decision where the Fed is expected to keep interest rates unchanged. On Thursday, we will see the US Retail Sales and Jobless Claims figures, while on Friday we conclude the week with the US PMIs.
