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Tech Stocks Break Out

The Nasdaq has broken out to fresh, all-time highs today on the back of the latest US economic data yesterday. The ADP employment figure showed that private payrolls slowed in May, printing 152k, down from 188k previously and below the 173k figure the market was looking for. The data has seen USD trading lower ahead of tomorrow’s headline NFP data with traders now bracing for a weaker figure.  
 

US Jobs Data Key Near-Term

A great deal of focus is being put on the data on the back of the recent drop in inflation readings (CPI and PCE both cooled last month). The market has started to tentatively lift pricing for a September rate cut, offering support to stock prices. If tomorrow; data shows fresh weakness in the labor market (which would mark a second consecutive monthly drop) this would see September rate-cut pricing moving higher still, lending further support to stock prices. The most bullish outcome for the Nasdaq tomorrow would be a drop in the NFP, a move higher in the unemployment rate and a move lower in wage growth. Wage growth in particular will be key tomorrow given the importance of inflation-linked data currently.
 

Bearish Risks

The obvious near-term risk for tech stocks is if jobs data comes in above forecasts tomorrow. Many Fed officials recently have cited the need to maintain rates at current levels for longer and any bullish data will be seen as endorsing this view, leading USD higher again and weighing on stocks.
 

Technical Views

Nasdaq

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The rally in the Nasdaq off the bull channel lows has seen price breaking out above the 18.912.17 level. With momentum studies turning higher, focus is on a continued upside move with a test of the bull channel highs the next resistance to note. To the downside, 18,406.68 remains key support to note. 

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