NAS100 Weighed by the Fed’s Hawkish Message
NAS100 Analysis
The US Federal Reserve raised rates by 50 basis points on Wednesday, in a downshift from a series of historically large 0.75 hikes. However, this was largely a hawkish outcome as the bank maintained its guidance "ongoing increases" and officials upgraded their expectations for the appropriate policy path. [1]
Based on yesterday's updated Summary of Economic Projection (SEP), officials project the benchmark rate to peak at 5.1% next year, from only 4.6% previously - implying another 75 basis points worth of increases.
The aggressive rhetoric and the higher terminal rate weigh on NAS100 which pierces the upper band of the daily Ichimoku Cloud and the EMA200. This creates risk for decline towards the 11,213-11,080 region, although new catalyst will be required for further weakness that will bring the 2022 lows (10,437) into the spotlight.
Markets don't seem to be convinced that the Fed will raise rates by as much as it forecasts, since CME's FedWatch Tool assigns the highest probability to a terminal rate of 5.00% and also suggests rate cuts within 2023. [1]
The decline in NAS100 seems to be a bit underwhelming and the index comes from a series of higher highs. As such, it has not lost the ability to reclaim the 12K handle, but sustained recovery past 12,468 may prove elusive in the near term.
In any case, caution is needed as market still digest the Fed's decision and look to the rest of the economic calendar, for retail sales and PMIs.
Nikos Tzabouras
Senior Market Specialist
Nikos Tzabouras is a graduate of the Department of International & European Economic Studies at the Athens University of Economics and Business. He has a long time presence at FXCM, as he joined the company in 2011. He has served from multiple positions, but specializes in financial market analysis and commentary.
With his educational background in international relations, he emphasizes not only on Technical Analysis but also in Fundamental Analysis and Geopolitics – which have been having increasing impact on financial markets. He has longtime experience in market analysis and as a host of educational trading courses via online and in-person sessions and conferences.
References
| Retrieved 14 Dec 2022 https://www.federalreserve.gov/monetarypolicy/fomcpresconf20221214.htm |
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