US stocks fell sharply on Tuesday while bond yields rose as investors waited for the upcoming interest rate decision by the Federal Reserve. Tech stocks were among the worst performers, with the Nasdaq 100 index shedding more than 300 points. The sell-off intensified as it became clear that the Fed does not have an option other than tightening. For example, data published by the government showed that the producer price index (PPI) rose by 9.6% in November. This was the highest increase since 2010. The data came a few days after numbers revealed that consumer inflation jumped to the highest level in more than 40 years.
The US dollar held steady in the overnight session as investors wait for the interest rate decisions by key central banks like the Fed, BOE, SNB, BOJ, and the ECB. The Fed is expected to tighten when it concludes its meeting later today while the other banks will be a bit cautious since the Omicron variant is reportedly rising. Before the Fed decision, the US dollar will react to the latest US retail sales numbers that will come out in the afternoon session. The numbers are expected to show that retail sales retreated slightly in November as prices jumped.
The economic calendar will have some key events today. Earlier on, China released strong economic numbers including retail sales and GDP numbers. In the morning session, the UK will publish the latest inflation numbers. These numbers will come a day after the country published strong employment data. In Europe, France and Italy will publish the final inflation numbers of the year. The Canadian statistics agency will release the latest inflation data while the Energy Information Administration (EIA) will release the latest inventories numbers.
NDX100
The Nasdaq 100 erased most of the gains that it made last week. It tumbled to a low of $15,700, which was the lowest level since December 6th. On the four-hour chart, the pair has moved below the 50-day simple moving average. It is also slightly below the dots of the Parabolic SAR while the Average Directional Index (ADX) has pointed upwards. Therefore, while the overall trend is bearish, there is a likelihood of a bullish rebound after the Fed decision.
EURUSD
The EURUSD pair tilted lower ahead of the Fed decision and after Germany downgraded its economic forecast. The pair is trading at 1.1270, which is along the lower side of the triangle pattern. It is also slightly below the 25-day moving average while the Relative Strength Index (RSI) and the Stochastic Oscillator have pointed lower. Therefore, the pair will likely break out lower ahead of the FOMC decision.
USDCAD
The USDCAD pair has been in a bullish trend since the latest Bank of Canada interest rate decision. The pair is trading at 1.2845, which is substantially higher than last month’s low of 1.2280. On the daily chart, the pair has struggled to move above this level several times since July. It has moved above the 25-day and 50-day moving averages while the MACD is above the neutral level. Therefore, the pair will likely have a bullish breakout.
