Nasdaq trades in narrow band as market eyes Friday's CPI data

FUNDAMENTAL OVERVIEW

The Nasdaq has been moving within a narrow band this week, with market participants waiting for the important US CPI data scheduled for Friday. Last Thursday, the index experienced a sharp rally following dovish remarks from Fed’s Waller comments, who suggested he would hold rates steady at the September meeting unless a hot CPI materializes.

On Friday, the Nasdaq dropped sharply after the US NFP data came in stronger than expected, with August job growth nearly three times the consensus estimate of 56K. However, the decline was short-lived as the NFP-driven moves were quickly reversed.

The reason for this price action was that traders were not focused on the NFP data but on the CPI. Markets tend to follow the data that the central bank prioritizes, and the Fed's current priority is inflation.

This explains the rangebound trading seen this week, as attention has shifted to the CPI figures. Unless there is an unexpected development in US-Iran relations, the market is likely to stay choppy or slightly negative, with traders possibly starting to hedge ahead of the CPI release.

A CPI reading that is soft or in line with expectations would likely lift the Nasdaq, given Waller's statement that he would not consider a rate hike without a hot CPI. Conversely, a higher-than-expected core monthly inflation figure could spark another selloff, as traders would position for a rate increase.

NASDAQ TECHNICAL ANALYSIS – DAILY TIMEFRAME

The Nasdaq has found support near the 28,950 level. Should the price retest this support, buyers are likely to enter with a risk below that level, aiming for a move to record highs. Sellers, meanwhile, are looking for a break below support to initiate short positions targeting the July low around 27,200.

NASDAQ TECHNICAL ANALYSIS – 4 HOUR TIMEFRAME

NASDAQ TECHNICAL ANALYSIS – 1 HOUR TIMEFRAME

A minor support level at 29,470 marks the tighter range established over the past week. Sellers are seeking short trades near resistance and on a break below support, while buyers are entering near support or waiting for a break above resistance.

UPCOMING CATALYSTS

Tomorrow, the US PPI report and weekly jobless claims are due. On Friday, the week concludes with the CPI report.