Morning Note: Fed in Focus, EU Inflation, Nasdaq & DAX

All eyes on the Fed

Today, we are getting the long-awaited Fed’s interest rate decision (18:00 GMT). This meeting will be one of four held annually, as it includes the dot plot, during which the Bank will present its rate projections.

• The Federal Reserve is forecasted to keep the rates in their target range between +4.25 and +4.50 percent.
• After the recent CPI readings, inflation has stalled, and there are fears that current geopolitical tensions can create inflationary pressures near- to mid-term. The recent surge in oil is a good example, as investors are now curious to see the June CPI numbers.
• Despite the pressure from the White House to lower the interest rates, the Federal Reserve is holding strong to its path of taking a wait-and-see approach. Which, to be honest, is not the worst-case scenario, because if inflation starts picking up, rate cuts could be out of the question even for this year.

So far, the market has enjoyed the fact that the Fed is trying to keep its independent status and not surrender to the White House. Despite no action on the interest rate front, investors welcome the Fed’s strong stance. Today, we will be carefully monitoring the press conference (18:30 GMT) and what Jerome Powell has to say about future projections. A more hawkish rhetoric could push the US dollar higher. Indices could stay somewhat flat due to the absence of any shifts in the rates.

Nasdaq100 technical outlook

Looking at the technical picture of Nasdaq100, we can see that it recently slowed down its acceleration and corrected slightly lower. That said, the index is not far from its all-time high, suggesting a good chance of revisiting that area.

If Nasdaq100 continues to trade somewhere above the 21464 territory, which acted as a good area of resistance on the 19th of May and then as support on the 5th of June, that could be a sign that the bulls are not giving up. If so, the price may reverse back up to the current highest point of June, at around 22042. Slightly above lies the current all-time high area, at 22222, which might become an attractive level to reach.

Alternatively, a drop below the 21464 zone may spark some fears, and the Nasdaq 100 could drift to the 21000 zone. Slightly below is another possible testing area, which could provide some temporary support, and the 50-day EMA.

EU May inflation numbers

During the European morning, the EU is delivering its May CPI figures, which are expected to fall below the ECB’s target of 2 percent.

• The headline YoY CPI figure is forecasted to move towards the +1.9% mark from the previous +2.2%. The core YoY figure, which excludes energy, food, alcohol and tobacco prices, is also believed to have slid from +2.7% to +2.3%.
• Such declines favour the ECB’s stance towards lowering rates. Currently, the main eurozone interest is at +2.15%, after a 25 bps drop that was made by the Bank at the beginning of June.

Despite lower inflation and rates, the euro seems to remain strong against its major counterparts. But that could be a result of other weaker currencies, apart from the yen and the franc. Although the German DAX corrected lower recently, it still remains elevated and somewhat positive. Mainly driven by good earnings from top European companies, which were recently delivered.

DAX technical outlook

Although we have seen DAX correcting back down, after hitting a new all-time high at the beginning of June, we remain somewhat positive with the near-term outlook, as long as the index stays above our EMAs on our daily chart.

A rebound and a push back above the 23740 zone, marked by the inside swing low of 2nd of June, could invite more bulls back into the game. DAX might then travel back to the May highs, or even to the current all-time high, at around 24479 area.

On the other hand, a price drop below the 50-day EMA could be a bearish signal, possibly opening the door to further declines. That’s when we will aim for the 22607 area, which is the highest point of April. Around there, the index may test the 100-day EMA.

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Past performance is not indicative of any future results. This information is provided for informative purposes only and should not be construed to be investment advice.