Dow Jones and Nasdaq 100 crater as Fed shivers spread
Posted On May 6, 2022
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American stocks had one of their worst days since 2020 as investors reflected on the hawkish decision by the Federal Reserve. On Wednesday, the bank signaled that it was ready to deliver several 0.50% rate hikes this year. It has already hiked rates by 0.75% this year. Tech stocks were the worst performers as the Nasdaq 100 index declined by more than 5%. Tesla erased 7% of its value while companies like Microsoft, AMD, and Nvidia declined by more than 5%. E-commerce companies like Shopify and Etsy fell by over 15%.
The US dollar index rose as investors reacted to the Fed decision. Investors are also waiting for more economic data from the United States. The Bureau of Labor Statistics (BLS) will publish the latest jobs numbers. Economists expect the data to show that the economy created over 391k jobs in April after adding 431k in the previous month. They also expect that the unemployment rate declined to 3.5% from the previous 3.6%.
The Canadian dollar tilted upwards ahead of the upcoming jobs data. Economists polled by Reuters expect the data to show that the employment change declined from 72.5k in March to 55k in April. The unemployment rate is expected to have dropped from 5.3% to 5.2%. Meanwhile, the price of crude oil retreated slightly ahead of the outcome of the OPEC meeting. Analysts believe that the cartel will stick to its plan to gradually increase output. At the same time, the US government has started buying oil to fill its strategic reserves.
The EURUSD pair declined to a low of 1.0500 as the dollar strength continued. It has fallen from this week’s high of 1.0646. The pair has declined below the 25-day and 50-day moving averages while the Stochastic Oscillator has dropped. It has moved below the middle line of the Bollinger Bands. Therefore, the pair will likely keep falling as bears target the next key support level at 1.0460.
The USDCHF rose to a high of 0.9890, which was the highest level since April 19. On the daily chart, the pair has moved along the upper line of the Bollinger Bands. It has also risen above the 25-day and 50-day moving averages. The Relative Strength Index and the MACD have kept rising. Therefore, the pair will likely keep rising as bulls target the key resistance level at 0.9900.
The EURCHF pair rose to a high of 1.0395, which was the highest level since March 17. On the four-hour chart, the pair managed to move above the important resistance level at 1.0370. It also moved above the 25-day and 50-day moving averages. It has formed a cup and handle pattern while the Relative Strength Index (RSI) has moved to the overbought level. Therefore, the pair will likely keep rising.