On Friday, the Nasdaq experienced a notable sell-off following disappointing US Flash Services PMI data and the Final UMich Consumer Sentiment survey, which revealed long-term inflation expectations reaching a 30-year high. This sell-off was largely triggered by fears that the Federal Reserve may struggle to cut rates promptly amid ongoing inflation concerns.
The Nasdaq failed to surpass the key resistance level of 22111, leading to a decline. Sellers are likely to continue targeting the 20990 support, while buyers hope for a recovery above resistance to reinstate bullish momentum.
The bearish trend intensified following a break of the upward trendline on the 4-hour chart. Buyers may find a more favourable risk-to-reward scenario around the 21430 support, while sellers could benefit from a breakdown towards the 20990 level.
In the short-term, a recent lower low at 21955 may pose resistance. If the price retraces to this level, sellers could enter, aiming for a decline towards the 21430 support, while buyers will seek a breakout to foster bullish movements.
Upcoming economic reports include the US Consumer Confidence report and US Jobless Claims figures, concluding with the US PCE data on Friday.
A disappointing services PMI release and a surge in long-term inflation expectations have heightened concerns about the Federal Reserve’s ability to cut interest rates soon. Markets responded swiftly. Tech-heavy stocks bore the brunt of the sell-off, dragging Nasdaq lower after failing to break resistance at 22111. The sharp reaction suggests traders remain sensitive to any news that could delay policy easing. Without clearer signs of inflation subsiding, downside risks persist.
A key level now stands at 21430, where technical buyers may attempt to enter. Earlier, an upward trendline provided support, but once price broke beneath it, sellers strengthened their grip. Returning towards 21955 may invite further selling pressure. If resistance holds, targets around 21430 and 20990 remain valid. If, however, upward momentum builds, a recovery towards 22111 could be on the table.
Inflation expectations running at a 30-year high put central bankers in a difficult spot. Hopes for early rate cuts diminish when consumers anticipate persistent price increases. A rebound in consumer confidence or weaker labour market data might shift this outlook. These next data releases, including PCE inflation on Friday, could heavily influence sentiment and future movement.
It remains a volatile period. Economic reports coming up may dictate direction, offering both buyers and sellers opportunities. Whether inflation fears hold back rallies or confidence resumes, staying adaptable will be key.
