Technical Analysis & Market Insights - Feb 11

Market Insight – S&P Pulls back, Nasdaq Dives, Inflations Rises, Rate Hikes?

Nasdaq 100 dives more than 2.10% as US inflation continues to surge. U.S Stocks were lower after the close on Thursday session, as losses in the Utilities, Technology and Industrials sectors led shares lower. Major global stock indexes fell on Thursday under pressure from crucial U.S inflation data, falling tech shares and rising bond yields. The yield on the benchmark 10-year U.S. Treasury note touched the 2% mark for the first time since August 2019.

As per the Bureau of Labour Statistics, January CPI increased 7.5% year on year. It is the highest reading since 1982. Core inflation rose to 6% Y/Y compared to December’s 5.7% indicating the price pressures are broadening in the US economy. Major contributor of price surge is from shortages as economy is now moving towards reducing overall shortages.

The S&P 500 is now down about 5% in 2022 and the Nasdaq is down about 9%. On the other hand, Fed is broadly expected tighten its monetary policy and begin raising rates in its March meeting. The road ahead for Stock markets will be rocky especially for highly valued shares as investors are worried about what will be impact of higher rates and less cheap money soon. As Fed moves towards withdrawing stimulus at a fast rate in the coming months, reduced liquidity will create environment for decreased speculations. This tightening into an overvalued market will increase volatility and more downside for the markets.

Chart of The Week - Technical Analysis

EUR/USD - Possible Breakout!

• Resistance Zone: 115.80 to 116.10
• Key Resistance Level: 114.80
• Major Pivot Point: 113.60
• Key Support Level: 112.30
• Support Zone: 11.45 to 111.20
• Last Analysis Date: Blue Vertical Lines
• 200 Day EMA – Green Line
• 50 Day EMA – Red Line
• VIX – Volatility Index @ 23.91 +3.95 (+19.79%)

Chart Analysis:

Directional bias: 2 Weeks EUR/USD

EUR/USD pair is probing the key resistance level at 114.80 as it reversed sharply in the close of January after registering a low at 111.21. It seems EUR/USD has found the inflection at the Support Zone on the Chart between 111.45 to 111.20. Another test of 114.80 and close above 115.00 might confirm a larger trend reversal that is indicated on the chart by the upward parallel channel and a possible V shaped recovery. From here on the prices could move above the Resistance Zone of 115.80 to 1160.10 to later test the 11.75 level on the chart.  

A closer look at the price action suggests Euro has advanced through the downward parallel channel that started to shape up in May 2021 with decline in Euro from the peak of 122.60. The resistance at 114.80 has been proving very strong and has forced the prices thrice in since January 14^th. However, it seems it could be broken this time on as the Euro is now consolidating just under the key resistance level at 114.80. Any drop below the Pivot point at 113.60 could bring the pair back in the Downward channel and then could first test the Key support level at 112.30. if the pressure continues then prices could extend to test the Support Zone at 111.45 to 111.20.

The RSI indicator is just around 57.45 is above the mid-range indicating every dip could be a buying opportunity. The price actions suggest bullish bias of the market as prices are just holding above the 50-Day EMA red line and heading towards the 200-day EMA green line.

Fundamental Overview: Dollar took a hit after hitting the recent peak at 97.40 but the combination of higher Fed rate hike odds, higher US treasury yields, and rising inflation suggest the downside for the Dollar is limited and this could be bad news for most USD Pairs.