The Federal Reserve is widely expected to raise interest rates at their two-day meeting concluding on Wednesday of this week. This rate hike has been ‘baked in’ for some time now, but as we near the expected move, markets appear to be convulsing a bit, with equity weakness starting to show around mid-day in the U.S. session on Friday.
The big mover on Friday was tech as Nasdaq stocks went through some rather severe selling going into last week’s close. We did see a bit of buyer support off of the lows, but on the open of the new week, that weakness has carried over to Asia and has begun to show in Europe. This move in the Nasdaq 100 comes after a rather strong showing after the Presidential election in the United States last November. After setting an election night low of 4560, the Nasdaq 100 has rallied up to a high point on Friday morning of 5897. That’s a 29.3% return in just a little over seven months as we’ve moved deeper into a rising rate environment.
Chart prepared by James Stanley
To open this week, we’ve seen that equity weakness expand on a global basis. On the chart below, we’re looking at a recent support break in the Nikkei as the index crossed back-below the vaulted 20k level.
Chart prepared by James Stanley
And on the below chart, we’re looking at the move lower in the German DAX; after the index failed again to break through a zone of resistance around 12,850 on Friday.
Chart prepared by James Stanley
The British Pound Breakdown: Sterling Bears Re-Engage with BoE on Thursday
Ahead of U.K. elections last week, we took a ‘big picture’ look at price action in GBP/USD, with specific focus on the psychological level of 1.2750. This zone on the chart had helped to set resistance during the six-month range after the October flash-crash; and after the topside breakout on the heels of PM Theresa May’s announcement of early elections, this zone of prior resistance became support as bulls drove Cable-higher.
