The US100 index, reflecting the performance of some of the largest companies listed on the NASDAQ, exhibited a modest decline in the futures market this morning, following a lower close in Friday’s session. Despite this, the index is not showing significant bearish momentum and continues to operate within its established price range. This stability comes amidst evolving market expectations regarding monetary policy, with the Chicago Exchange indicating nearly no chance of further rate hikes in the next year and a 30% likelihood of a Federal Reserve rate cut of 25 basis points in the first quarter of 2024. As the rate hiking cycle seemingly concludes, the market is poised for conditions that could favor a bullish shift.
A notable factor buoying the US100 and broader stock market is the ongoing decline in the US Dollar and bond yields. The US Dollar Index has seen a 3.20% drop this month, continuing its downward trajectory. Simultaneously, the US 10-Year Bond yield has reached its lowest point since September 2023. The confluence of a weakening Dollar and falling bond yields could bolster investor sentiment, potentially propelling the US100 beyond the critical resistance level of $15,871.
In the global context, both Asian and European stock futures have started the day on a stronger note. Positive investor sentiment in these markets may well be mirrored in the US market. The immediate future of the US100 is likely to be heavily influenced by two key events: the release of the Federal Reserve Meeting Minutes and NVIDIA's third quarterly earnings report for 2023. NVIDIA, a major player within the US100 with a significant weight of 4.58%, is anticipated to report increased earnings and revenue, continuing its recent trend of strong financial performance. Positive earnings results from NVIDIA could provide substantial support to the US100.
NVIDIA's stock has already reflected investor optimism, with a 19% increase over the past month and a 2% rise in the past week. This price movement underscores shareholder confidence ahead of the earnings release. While the US100 is currently in a retracement phase, trading above major trend lines and the Volume-Weighted Average Price, investors are watching for it to hit the $15,831 mark, a move that could trigger a buy signal on short-term charts.
In currency markets, the GBPUSD pair is also in focus. The Bank of England’s Deputy Governor, Dave Ramsden, has indicated that high interest rates are likely to persist for at least another six months, as the central bank aims to bring inflation back to its 2.0% target. Although analysts anticipate a gradual reduction in borrowing costs starting around May or June 2024, the immediate pressure on mortgage holders is set to continue. Interestingly, the market anticipates the Federal Reserve to initiate rate cuts before the Bank of England, a dynamic that could support the GBPUSD pair. The current trend in GBPUSD suggests a corrective wave targeting the previous high at 1.24638. Investors are closely watching whether the pair will find support at this level, following previous price action patterns, to determine its future trajectory.
