U.S inflation fears have reached the Asian markets which reached their lowest level in seven weeks during the Wednesday trading session.

Growing inflation concerns and surging commodity prices coupled with disappointing job market growth has seen analyst calling for earlier interest rate hikes and much higher bond yields.

Tech stocks seem to remain the biggest losers which saw the Nasdaq overnight lower by 2% at one stage, the Dow Jones dropped 1.4% while the S&P 500 moved lower by 0.9%.

"Despite the severity of the moves, we sensed limited panic in our client conversations with many using (the) weakness as an opportunity to buy the dip, particularly in the value-orientated areas e.g. banks, energy and insurance," - JPMorgan

Market participants will be looking to the U.S consumer price index (CPI) data release later today around 14:30 SAST which could add more volatility to the trading session.

Here is what’s expected this week:

The Wall Street 30 Technical Analysis

The Wall Street 30 (WS30) broke out of its consolidation range and moved higher to new highs and also reached our target price at 34994 as described in our latest NFP note.

The all-time high level on the WS30 acted as major resistance which coupled with fundamental market events sent prices significantly lower at the start of the week. We could expect a move and daily close above the 34237-resistance level to be positive in the short term. While the 33765-support level has also now become a focal point for lower prices.

• The price action is testing the resistance level at 34237 and we might expect a daily close above this level the negate the downtrend.
• The 50-day SMA (blue line) is above the price action higher on the 4H chart and could also act as resistance to higher prices.
• The Relative Strength Index (RSI) is above oversold levels and is pointing higher.

Chart Source: Wall Street 4H Timeframe  - GT247 MT5 Trading Platform

Trading term of the day

Consumer Price Index (CPI)

The Consumer Price Index (CPI) is a measure that examines the weighted average of prices of a basket of consumer goods and services, such as transportation, food, and medical care. It is calculated by taking price changes for each item in the predetermined basket of goods and averaging them. Changes in the CPI are used to assess price changes associated with the cost of living. The CPI is one of the most frequently used statistics for identifying periods of inflation or deflation. - Investopedia

Take note: The outlook and levels might change as this outlook is released during the current days (Wednesday the 12^th of May 2021) U.S Market open.

Sources – MetaTrader5, Reuters, Investopedia.

Barry Dumas | Market Analyst at GT247.com

Barry has 12 years of experience in the financial markets. He enjoys educating clients on trading / investing and providing punchy technical analysis on securities. He currently holds a Wealth Management qualification and is studying towards becoming a Chartered Market Technician® (CMT) designation holder.

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