Traders of the NASDAQ100 Futures (CME: NQ) have taken to the sidelines ahead of the key U.S. CPI and Core Inflation Data. The prior week ended a three-week winning streak as traders digested the labour market report and services and manufacturing PMIs.

The U.S. rates futures have now priced in a 71% chance of another 25 basis point rate hike by the Federal Reserve in the upcoming May decision. The NASDAQ100 futures will likely be weighed down if borrowing costs nudge ahead, dampening earnings and growth prospects of equities in the medium term.

Technical

The NASDAQ100 Futures have trended upward, with price action trading above the 100-day moving average. Support and resistance were established at the 12635.00 and 13345.00 levels, respectively.

Following a rejection of the resistance level, the index was lowered toward the 50% Fibonacci retracement level at the 12990.00 point. The 50% retracement level held as support on a second occasion and will likely be the make-or-break level for the NQ traders.

If price action breaks below the level on high volumes, it could signal the undoing of bullish traders holding the level as support by bearish traders. Bears will likely look to the 12635.00 level with interest if they commit to the downside.

Alternatively, if the 12990.00 level holds as support, bullish traders could be enticed to take the index higher, with the 13345.00 level earmarked as a probable level of interest.

Summary

The main driver of the NQ price action for the remainder of the week will be the market’s reaction to the inflation readings. If inflation tapers off in line with the downward trend from the ISM’s manufacturing and services PMI and a subdued labour market, the NASDAQ100 Futures could experience some tailwinds on the back of higher risk appetite if expectations of another rate hike subside.

Sources: Reuters, TradingView