Markets Shift Focus Amid Easing Inflationary Pressures

The market narrative is shifting as inflationary pressures ease and rate-hike expectations begin to limit gains in currency markets. The Federal Reserve's recent rate hike has led to a 6% drawdown in UKOIL, but potential reversals in crude oil prices and U.S. Treasury yields may shield markets from further drawdowns.

According to the CME FedWatch Tool, there is more than a 50% probability of another 25-basis-point rate hike at the October meeting. However, the decline in crude oil prices and moderation in energy disruption risks are signaling a potential reversal in inflationary pressures.

The EUR/USD and Nasdaq charts are showing defining support levels coming into focus. For EUR/USD, the 1.1460 support level represents a critical barrier between bullish and bearish biases. A clear move back above 1.1520 would strengthen the bullish continuation outlook, while a breakdown below 1.1460 would expose 1.1400 and the yearly low at 1.1320.

The Nasdaq is currently holding above its multi-week support near 28,800 despite fundamental headwinds. A breakdown below this level would target 28,400 and increase the risk of a deeper drawdown toward 26,600.