Nasdaq 100 Price Outlook:
Nasdaq 100 Awaits NFP Report as Index Threatens Range-Bound Price Action
While the Nasdaq 100 has long been the most volatile of the three major US indices, it is not immune from broader seasonal trends that can give rise to uninspired price action. Recent sessions have revealed the Nasdaq’s vulnerability to such forces as the index trades between the midpoint of its range over the last month, showing early symptoms range-bound price action may materialize in the coming weeks. That said, volatility may have an opportunity to rear its head with the upcoming non-farm payrolls report due Friday morning.
Nasdaq 100 Price Chart: Weekly Time Frame (December 2020 – June 2021)
Expectations ahead of the report have been raised following an upbeat ADP employment report Thursday. While strong economic data and a lower unemployment rate are positives for the average American, such occurrences might also drive the Fed to taper more quickly than the market previously expected. Taper talk and the monetary policy moves that may follow will likely work to pressure technology stocks which could, in turn, send the broader Nasdaq 100 lower.
Nonfarm Payrolls (NFP) Drives the US Dollar & Currency Volatility
Thus it can be argued the market is in a climate where good news is bad for equity prices because it means tighter monetary policy sooner, and bad news is good for stock prices because investors will expect the Fed to remain accommodative for longer. This relationship is likely felt most by the mega-cap technology stocks of the Nasdaq 100 because much of their valuation is based on future growth expectations under the current monetary policy environment.
Further still, investors were offered a glimpse at this dynamic Thursday following an upbeat ADP employment report when the US Dollar rose alongside US Treasury yields as the Nasdaq 100 slipped. With the upcoming NFP report set to be the most important scheduled event risk for the next few sessions, traders should be wary of potential volatility that might follow an exceedingly impressive or unimpressive print.
As it stands, volatility would likely be most muted should the print land within a few percentage points of the expected figure, an outcome that might leave the Nasdaq 100 grasping for direction in its current trading range. In the meantime, follow @PeterHanksFX on Twitter for updates and analysis.
–Written by Peter Hanks, Strategist for DailyFX.com
Contact and follow Peter on Twitter @PeterHanksFX