USD and Nasdaq continue strong run

13 July, 2018

US inflation figures were the main focus today for the US economy, as it saw CPI lift in line with expectations to 0.2% m/m. Well this is not a strong hawkish signal it does show that the US economy for the most part is seeing inflation rise in line with expectations, and it brings up the possibility of a potential forth rate hike this year if it does indeed increase, which would be an aggressive move from the FED. However, we are long while off that, but so far traders are loving the USD, even with the risk of trade a war and as economic inflation continues to cruise along in line with forecasts. US job claims were also in the spotlight and saw a drop to 214K (225K exp) which shows a continued improvement in the labour market as well - which should hopefully lead to further inflationary pressure in the long run. Tomorrow however is going to be a relaxed day for US data with only the Michigan sentiment survey coming up, so I wouldn't expect too much in the way of large movements compared to today.  

The real winner for me on the USD front though has been the USDJPY which continues to be bullish in the long run. The bullish run today continued as it lifted up past yesterdays resistance level of 112.033, pushing up towards resistance at 112.862 but coming up just short. It's likely that the bulls will look to play of the strong USD and gain further ground in this scenario and tomorrow resistance could be really tested. In the event that markets become bearish then support at 112.862 will be the likely target and we could see a bounce here. Lower than this and 111.083 becomes the main target, with the trend line potentially also acting as dynamic support. However, the long term movements have thus far been bearish and I would be surprised to see it pause at present.

Another big winner of all the US strength as of late has been the technology sector which has been dominating on the S&P 500, but today the NASDAQ hit record highs as tech stocks continued to outshine in the equity markets. Currently sitting at 7366 this level has never been seen, and some are wondering if we are overdue for a correction in the equity markets with all the rate hikes we're seeing.

Looking at the Nasdaq and it's very much a bullish channel going up the chart, with plenty of room to move at present. The next level of resistance is looking strong at 7400, but I would also be cautious around these levels as traders can get shy about the future. If it does fall lower then support at 7291 and 7136 are likely to be the key levels that traders will focus on before it touches the outer channel walls and bounces. Long term though, there is movement for the Nasdaq, the question is.. how much higher can it go.


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