NAS100 Weekly Chart
The NAS100 weekly chart remains overbought. Its RSI is close to 86, with the threshold level being 80. I.e., anything above 80 is considered overbought (green rectangle). It is unlikely that this condition will last long and a normalisation at some stage would be expected. Already this week shows some signs of stabilisation with the current weekly candle registering as red (blue arrow).
The NAS100 is a growth index and is generally sensitive to interest rates. There are concerns that the Federal Reserve will keep borrowing costs higher for longer and this is currently impacting the index.
NAS100 Daily Chart
Given its sensitivity, the NAs100 took a hit yesterday (green arrow) following the surprise rate hike by the Bank of Canada. Market participants have taken the view that even if the Fed does pause at its next meeting, there is a risk that rate hikes continue thereafter to combat stubborn inflation.
In effect the 25-bps hike by the BoC sent shockwaves through the NAS100, which were also fuelled by the Reserve Bank of Australia surprise 25bps hike just a day earlier.
The NAS100 has been rising the bullish wave of the AI story, but higher rates are now coming back into focus.
The Fed is due to release its statement next Wednesday. A central piece of the inflation puzzle will be delivered a day before when the consumer price index for May is scheduled.
Senior Market Specialist
Russell Shor joined FXCM in October 2017 as a Senior Market Specialist. He is a certified FMVA® and has an Honours Degree in Economics from the University of South Africa. Russell is a full member of the Society of Technical Analysts in the United Kingdom. With over 20 years of financial markets experience, his analysis is of a high standard and quality.