Stocks drop on the October effect and the RBA comes into focus
Nasdaq => The index falls below 11000
BTC/USD => The cryptocurrency falls below 19k
AUD/USD => The pair rises over 0.6450
Nasdaq falls to 2-year low
The Nasdaq fell below 11000 to a new two-year low after data on Friday boosted bets that the Federal Reserve would aggressively hike interest rates. The core PCE reading, the IUS central bank’s preferred measure of inflation, rose by more than forecast, and personal spending was also upbeat. The data came hot on the heels of stronger than expected jobless claims and a higher than expected to rise in Conference board consumer confidence. Today, the futures are falling further in risk-off trade as attention shifts to US ISM manufacturing which is expected to fall slightly. October is typically a poor month for stocks, a phenomenon known as the October effect.
Where next for the Nasdaq share price?
The Nasdaq trades below its 20 & 50 sma; it has taken out the June low at 11036, falling to a new two-year low of 10830. The RSI is tipping into oversold territory, so sellers should be cautious. The following support level can be seen at 10720, September 2020 low, ahead of 10000, the psychological level. Buyers will look for a move over11036 the June low to bring 11500 into focus, last week’s high. A rise above here will expose the 20 sma at11800.
BTC/USD starts October weaker
Bitcoin is trading modestly lower, below 19k, at the start of October, a month that is historically a strong month for crypts, even if it is traditionally a weak month for equities. Last week Bitcoin briefly rose above 20k, but there was a lack of appetite at the higher price. Meanwhile, Ether is trading around 1300, down around 1.5% across the past 24 hours. A deteriorating macroeconomic backdrop and a hawkish speech from Federal Reserve Vice chair Lael Brain have contributed to the risk-off market mood. Fears of a hard landing in the US are growing as data points to the Fed needing to hike rates more aggressively.
In crypto news, the Indian exchange, WazirX, has reportedly slashed its headcount by 40%. US crypto exchange Coinbase also temporarily halted transactions from US customers, although this has now been resolved.
RBA to hike rates
AUD/USD fell 1.9% last week, marking its third consecutive weekly decline in risk-off trade. Rising worries over inflation and a global economic slowdown hit the risk-sensitive commodity currency. Overnight Australian manufacturing PMI fell by more than expected, but this has been shrugged off ahead of the Australian central bank meeting. Looking ahead, US manufacturing PMI data will be in focus ahead of the RBA, which is expected to hike rates by 50 basis points for a sixth straight meeting to tame inflation; RBA Governor Philip Lowe reined in guidance on further hikes at the last meeting. However, with the Fed expected to hike by 75 basis points, the RBA could be forced to remain aggressive or threaten the Aussie dropping sharply and increase imported inflation.
Support can be found at 0.6363 (2022 low) and 0.63 (round number).
Resistance for the pair can be seen at 0.6520 (last week’s high) and 0.6650 (20 sma).