NAS100 Vulnerable on Fed Rate Path & Middle East Concerns

NAS100 Analysis

The US economy is very strong, the labor market robust and inflation persistent, as highlighted by last week's hot CPI report. This reinforces the Fed's recent reserved approach towards removing monetary restraint, which was reaffirmed this week by Mr Powell. The Fed Chair said the recent data "have clearly not given us greater confidence and instead indicate that it's likely to take longer than expected to achieve that confidence", adding that the restrictive policy needs "further time" to work. ^[1]

Geopolitics is another source of concern as markets await Israel's response to the weekend attack by Iran, in a conflict that has the potential to spark broadening of the Middle East hostilities and affect oil traffic.

The above factors weigh on NAS100, which runs its fourth straight losing week and threatens key technical levels at 17,447-17,322, comprised by the February low and the 23.6% Fibonacci of the last leg up. A breach could open the door to the 38.2% level, but we are cautious around sustained weakness.

On the other hand, the Fed is still expected to lower rates this year, while Israel has not yet announced a retaliation, while key players like the US appear cool-headed. NAS100 already finds reprieve today and has the ability to retake the EMA200 (at around 18,050), that would shift immediate bias again on the upside.