Global equity markets remain under pressure and the technology sector continues to see wild price swings. While some investors used the recent sell-off as buying opportunity and erased some of the losses ahead of the close, the stock market is in a mixed mood as inflation concerns return to the fore.
Market participants are waiting for today's US inflation report to assess whether the pressure on the Federal Reserve could increase further in the near-term. The central bank has tried its best to reassure markets that higher inflation is temporary and that no rate hikes are in sight. Nevertheless, investors are increasingly doubtful as inflation pressure builds up.
USTECH is approaching a former key support level at 13,393 points, which now acts as resistance. A break above this level would pave the way for a recovery towards 13,712 points, where the index is likely to run into stronger resistance. Positive RSI divergence on the H4 chart is also hinting at a short-term recovery rally (to find out more about RSI divergence, check out this video). While the overall uptrend remains intact, the spike in volatility is enough to make investors nervous, and a breakout below 13,000 points would likely lead to further momentum selling.
The Wall Street sell-off has been weighing on European stock markets too. However, the fact that EU indices are less tech-heavy has played in their favor this time. The EU50 managed to bounce off the 3913 support level once again and is showing resilience. Traders will now be looking for a breakout above 3973 resistance to confirm the double-bottom pattern and pave the way for a rally towards the April high at 4052 points. It is crucial for the index that the 3913 support level holds, as a breakout would signal the beginning of a deeper correction towards the 3786/3803 support zone.
Oil prices are marching higher again. An outage at the largest US fuel pipeline system led to a petrol shortage across the East Coast. While this is a short-term problem, concerns about whether similar attacks on US infrastructure could follow.
Looking at the charts, USOIL is trading within an ascending channel and the strong uptrend remains intact. The Daily RSI has not entered overbought territory yet, possibly indicating there is further room to the upside. The next challenge for USOIL lies at $66.70. A breakout above this level would then pave the way for a return to the March high at $68. To the downside, support is seen at $63.70 and the lower channel line.
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Investors are still digesting the latest statements from the US central bank, which surprised markets with a far more hawkish stance than expected