NASDAQ 100 REBOUNDS EVEN AS INFLATION AND DEFAULT RISKS REMAIN

US stocks rebounded on Tuesday after dropping substantially on Monday. The Dow Jones and Nasdaq 100 indices rose by more than 400 points while the S&P 500 rose by more than 62 points. The rally happened as some investors moved to buy the dips after strong US services PMI numbers by the Institute of Supply Management (ISM). Still, there are several reasons to be fearful about the market. For one, inflation is expected to rise substantially as the price of key commodities like crude oil, natural gas, and cotton surged. There has been no solution to the debt ceiling issue in the United States.

The euro was little changed against key assets as the market reflected on strong composite and services PMI numbers. The data revealed that the services PMI in the Eurozone declined to 56.4 in September. This was better than the median estimate of 56.3. Eurostat also published relatively weak producer price index (PPI) data. The bloc’s PPI declined from 2.5% in July to 1.1% in August. On a year-on-year basis, the PPI rose from 12.4% to 13.4%. Later today, the euro will react to the latest Eurozone retail sales numbers.

The economic calendar will be muted today. The key numbers to watch will be the ADP private non-farm payroll numbers. Analysts expect the data to show that the economy added more than 428k jobs in September. The next key data to watch will be the Energy Information Administration (EIA) oil inventories numbers. Still, investors will be eying the Chinese property market. Evergrande has continued to halt its stock while strains showed among other companies. Fantasia Holdings failed to pay a debt instalment while the Sinic credit rating was downgraded.

EURUSD

The EURUSD pair was little changed in the overnight session as traders waited for the Eurozone retail sales numbers. The pair is trading at 1.1606, where it has been in the past few sessions. As a result, the pair is trading along with the 25-day moving average while most oscillators are at the neutral level. Therefore, the pair will likely remain in the current range in the near term.

XTIUSD

The XTIUSD pair has been in a major bullish trend as demand for crude oil rises at a faster pace than supplies. On the four-hour chart, the price is above the 25-day and 50-day moving averages. It also moved above the key resistance level at 77.13 while the Relative Strength Index (RSI) has moved to the overbought level of 72. The price rose above the upper trendline shown in green. Therefore, the pair will likely keep rising as bulls target the key resistance at 80.

AUDUSD

The AUDUSD pair rose to a high of 0.7300 as demand for commodities rose. On the four-hour chart, the pair is approaching the key resistance at 0.7315, which was the highest level in September. The pair is being supported by short and long term moving averages while the RSI has been in a strong bullish trend. Therefore, the pair will likely keep rising as bulls target the important resistance at 0.7315.