Hassett: Falling Inflation Could Pave the Way for Rate Cuts

The news suggests that declining inflation could enable interest rate cuts, creating positive expectations for the market. On the S&P 500 (SPX), the RSI is at 50.5, indicating a neutral zone, while the MACD remains below the signal line, providing no clear momentum signal in the short term. The price is trading just below the 20-day moving average (7150) but remains above the 50-day moving average (7127), which is supportive. Although the likelihood of an upward move has increased due to the news, mixed technical signals and the price being at a critical resistance level warrant caution.

The news headline suggests that the decline in inflation may pave the way for interest rate cuts. This could serve as a positive catalyst for the NDX index, which is heavily weighted toward growth-oriented technology stocks. Technically, the index is trading above its 20- and 50-day moving averages, with the RSI at 57.8, indicating a neutral zone. Although the MACD is below the signal line, it remains in positive territory, pointing to short-term upside potential. However, caution prevails due to uncertainty surrounding the timing and magnitude of potential rate cuts.

Hassett's expectations of declining inflation and interest rate cuts could support a short-term rally in the DXY. Technical indicators also back this view: the RSI is in buying territory at 63, the MACD is above its signal line, and the price is trading above both the 20-day and 50-day moving averages. However, since rate cut expectations typically have a weakening effect on the dollar, the upside may be limited. Therefore, a moderately confident upward move can be anticipated.