Nasdaq, Bitcoin, Gold among beneficiaries of falling rates expectations

Interest rate hikes may have ended
Low- and zero-yielding assets continue to outperform on falling rates expectations
Nasdaq in ‘Cup and Handle’ breakout potential

The major US indices have all bounced back strongly after dropping the day before as the Fed’s dovish rate hike triggered profit-taking. We are also seeing precious and base metals moving higher, along with Bitcoin and other cryptos. The US dollar has continued to weaken as the short-end of the yield curve remains under pressure, with US 2-year yields dropping below 3.90% today.

The market is thus betting that we have reached a peak in terms of rate hikes and that from here looser monetary policy should follow.

The Fed, SNB and BoE all hikes interest rates this week, but the message from these banks was the same: more increases may be required, not will be, if inflationary pressures persist.

With investors starting to price in interest rate cuts for later in the year or start of next year, this should help to relief pressure on technology stocks, and underpin non-interest-bearing assets like gold and silver.

Nasdaq 100 Technical Analysis

The Nasdaq may be about to stage a more decisive rally, as it continues to find support on the dips.

While Wednesday’s large bearish-looking daily candle formed around former resistance area of 12850/900 appears quite bearish, the fact that we haven’t had any downside follow-through suggests the market is not willing to go lower.

Therefore, the larger “cup and handle” formation observed on the larger time frame still remains valid. The cup & handle formation is a bullish continuation pattern. The fact the handle has a shallower dip than the cup part of price action means the pressure is building for a bullish breakout.

The fact that the Nasdaq has managed to reclaim its 21-day exponential average and held above the 200-day average earlier this month is another sign of bullish strength.

So, a bullish breakout may still be on the cards above 12885-12900 resistance area, for as long key support around 12600 to 12450 is defended by the bulls. If that happens, look out for follow-up technical buying above that zone.

Only if the abovementioned 12450-12600 support area gives way, do we turn bearish on the Nasdaq again, or if we observe a key reversal pattern at higher levels, whichever comes first.

-- Written by Fawad Razaqzada, Market Analyst

Follow Fawad on Twitter @Trader_F_R

The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex, commodity futures, or digital assets, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to FOREX.com or GAIN Capital refer to StoneX Group Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.

Please note that foreign exchange and other leveraged trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved, seeking independent advice if necessary.

The products and services available to you at FOREX.com will depend on your location and on which of its regulated entities holds your account.

FOREX.com is a trading name of GAIN Global Markets Inc. which is authorized and regulated by the Cayman Islands Monetary Authority under the Securities Investment Business Law of the Cayman Islands (as revised) with License number 25033.

FOREX.com may, from time to time, offer payment processing services with respect to card deposits through StoneX Financial Ltd, Moor House First Floor, 120 London Wall, London, EC2Y 5ET.

GAIN Global Markets Inc. has its principal place of business at 30 Independence Blvd, Suite 300 (3rd floor), Warren, NJ 07059, USA., and is a wholly-owned subsidiary of StoneX Group Inc.