3 Reasons for USD Strength! CPI, Fed Rate Hikes & Treasury Yields | NVIDIA Rocks NASDAQ

Good day, Team GCI.

Yesterday we saw a sudden rise in USD pairs like EURUSD.

As traders, that leaves us with the usual two questions:

Why did it happen? And is it over? Let’s take a look.

I’m Brad Alexander, and in today’s Market Outlook, let’s take a look at Forex trading on the S&P500, the NASDAQ, the Dow Jones Industrial Average, Gold, XAUUSD, GBPUSD, AUDUSD, and EURUSD.

Just a reminder that these videos are intended as observational and educational, and are not to be considered as trading advice.

The catalyst for the move was Tuesday’s CPI, which came in slightly higher than analysts’ expectations.

You might say that a 0.1% miss between the forecast and the actual figure is not much, but it actually is.

Once you multiply the monthly figures over an entire year, the figures are much higher than the Fed’s inflation target.

That means that the Fed is more likely to raise interest rates and, therefore, a stronger currency…USD.

Secondly, a Fed governor, Christopher Waller, suggested a 0.5% increase in interest rates, which would double the estimate for December.

Thirdly, we had another spike in 2-year and 10-year Treasuries, even though the bond markets were closed yesterday.

On the technical side, we see falling wedges in GBPUSD, AUDUSD, and EURUSD, and this may be a bullish signal.

We have to go to the GBPUSD weekly chart to see the big picture and there may still be room to move to the downside.

On AUDUSD, we see price action trying to break support and the neckline of this huge head and shoulders pattern, with levels of support below.

We see the same falling wedge in price action on gold, and price has broken support, with the next key level of support below at $3,960.

It looks like US investors are ignoring the threat of higher interest rates and are putting more faith in earnings reports.

The NASDAQ has wiped out its post-election losses with the Dow and the S&P 500 making good gains.

But look what happened to the NASDAQ and the S&P 500 this morning!

They opened with a gap to the downside while the Dow went up.

Why the gap? Two words: Jensen Huang.

The CEO of NVIDIA has been embroiled in some personal scandals and things like this always affect share prices.

NVIDIA weighs heavily on the NASDAQ and the S&P 500 but less so on the Dow; hence the discrepancy.

The daily chart on NVIDIA tells the story and this may change if the company can positively resolve the issues and reassure investors.

However, the US Congress want to speak to Jensen Huang, so this may take a while.

That’s all for now.

CFDs and FX are leveraged products, and your capital may be at risk.