Nasdaq 100 sinks as Fed and China Covid fears rise
US stocks continued their struggle as the market weighed the Federal Reserve’s change in tone. The Dow Jones, Nasdaq 100, S&P 500 and Russell 2000 all fell more than 0.50% as bond yields rose. On Wednesday, Fed minutes showed the bank will continue to raise rates in May and at future meetings. Another change is that the bank will start implementing quantitative tightening by selling bonds worth $75 billion each month. The report came a day after Lael Brainard, a low-rate advocate, said she supported the policies. Data from the United States showed initial jobless claims fell to 166,000 last week.
Market volatility also occurred as concerns over the manufacturing sector persisted. Data released this week by Markit revealed that the sector was underperforming. Part of that concern is the current Covid-19 crisis in China. The government has put in place strict measures to curb the pandemic, such as the Shanghai lockdown. As a result, companies like Tesla and Apple have been forced to slow production. Tesla closed its Shanghai factory in March and has not set a reopening date. Other companies affected are Volkswagen and Thyssenkrupp.
The Canadian dollar fell against the US dollar ahead of the latest jobs data. Economists expect the figures to show the country’s labor market remained tight in March as the recovery continued. Analysts hope the economy will have added more than 80,000 jobs during the month. They see the unemployment rate drop to 5.3% while the participation rate climbs to 65.4%. The Canadian dollar also fell due to falling oil prices. Brent fell to $99.35.
XBRUSD fell to a low of 99.35, which was significantly lower than the 134 year-to-date high. On the four-hour chart, the price has broken below the 25-day moving average. It is also below the descending trend line shown in red. The Stochastic SAR and the Commodity Channel Index fell. Therefore, the pair is likely to continue falling as the bears target the support at 95.
The EURUSD pair continued to fall as global risks increased. The pair moved to a low of 1.0872 which is slightly above the key support at 1.0850. The pair broke below the 23.6% Fibonacci retracement level. It also broke below the short-term and long-term moving averages. Therefore, it looks like the bears are prevailing, which means it will likely continue to decline in the near term.
The USDCAD pair hit a high of 1.2600, which was the highest point since March 22nd. The pair moved above key resistance at 1.2585, which was the March 29th high. The William % Range has reached the overbought level. The pair is also above the 25-day moving average. Therefore, it is likely that the pair will hold steady ahead of the upcoming Canadian jobs data.