Nasdaq 100 Index Stung by the Surging US Dollar Index (DXY)

Summary:
• The Nasdaq 100 has dropped in the past two straight days as the US dollar index (DXY) has surged to a multi-decade high.

The Nasdaq 100 has dropped in the past two straight days as the US dollar index (DXY) has surged to a multi-decade high. The tech-heavy index has dropped to $11,744, which is about 30% below the highest level this year. This performance is in line with other leading indices like the German DAX, Dow Jones, and CAC 40.

US dollar index strength

The Nasdaq 100 index has crashed because of a combination of factors. For example, it has crashed as investors reduce their earnings expectations because of the soaring inflation. Analysts believe that many companies will publish weak earnings during this season. 

It has also declined sharply because of the rising fears of a recession in the United States. All conditions for a recession are there. For example, the unemployment rate is low, inflation is surging, and interest rates are rising. Historically, these conditions usually lead to a recession within a few months.

Another important factor that has dragged the Nasdaq 100 index and QQQ ETF is the stronger US dollar. The closely-watched dollar index has surged from less than $100 to over $108. Investors and businesses around the world have been moving to the US dollar, which is seen as a safe haven. 

A strong dollar has a major impact on many Nasdaq constituents that do business abroad. This includes companies like Apple, Microsoft, AMD, Nvidia, and Salesforce. With currencies like the euro, Japanese yen, and British pound crashing, analysts believe that these firms’ earnings will be hit by as much as 10%. 

Nasdaq 100 forecast

The daily chart shows that the Nasdaq 100 index has been in a strong bearish trend in the past few months. Along the way, it has formed a descending channel that is shown in blue. It is now pulling back below the upper side of this channel. The index has also declined below the 25-day and 50-day moving averages.

Therefore, the index will likely keep falling as sellers target the lower side of the channel at about $11,000. A move above the resistance point at $12,120 will invalidate the bearish view.