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  • Weekly Summary: Fed is Getting Tougher while Euro Gets Weaker

Weekly Summary: Fed is Getting Tougher while Euro Gets Weaker

Investors are still digesting two main issues that have been directing markets over the last couple of days. The first is the overdue attempts of the Federal Reserve (Fed) to tame inflation and the second is the persistent progression of European countries towards economic disaster.

Several influential members of the Fed, including Governor Lael Brainard, have called for  interest rates to be raised by 0.5% in May. The Federal Open Market Committee (FOMC) Minutes which were released this week revealed the Fed’s exact plan to tighten monetary policy by a monthly selling of $95 billion of Treasuries and mortgage-backed bonds from its holdings.

The U.S. stock market was certainly not happy with this. The S&P 500 broad market index scaled back from its weekly highs by 3% to reach 4450 points, which could lead to a  change in direction to the downside. However, the Atlanta Fed President Raphael Bostic and Chicago Fed President Charles Evans came to the rescue and calmed down investors while calling on the Fed not to rush with sharp interest rate hikes.

So, we may witness some kind of insider trading here. Nevertheless, tension has eased in the markets, and the S&P 500 index has resumed its upside track to the 4515-point level by Friday afternoon.

Moreover, the index kept its upside pattern, but it now has rather limited potential. Next week maximum resistance could move to 4530 points, while the nearest support could be at 4430-4400 points, or a minimum of this week. So, it is better to avoid opening any long positions now, while it is too early to open short positions. The chance to open short positions may appear next week.

The oil marked missed its chance to soar to the unbelievable highs of $160-180 per barrel of Brent crude before mid-May. Prices are gravitating to $100 per barrel, while hovering within the support range of $96-105 per barrel. This range is likely to be sustained for the entire month of April. Only new moves of the European nations to ban crude and gas imports from Russia may shift this balance to the upside before that time.

Gold prices are holding gains at $1930 per troy ounce despite unfavourable conditions. The negative trend for gold is likely to continue through to the end of April. Open short positions from $1950-1960 per ounce with the target at $1840 are still looking good.

The Greenback continues to straighten against major currencies. EURUSD continues to lose ground as macroeconomic performance is deteriorating in the Eurozone while economic authorities are not willing to act accordingly to improve economic situation. The pair is close to meeting the target at 1.07000-1.08000. Current prices are allowing for the closure  of a part of aggressive short positions that were opened at 1.10450. The rest of these positions could remain active for the final strike down that may lead the pair to 1.07000 or even lower.

GBPUSD remain within the downside pattern with a target at 1.28000-1.28500. Short positions opened at 1.31200-1.31800 reached the first target at 1.30300-1.30400. It could be wise to close partially short positions now, while leaving the second part open in case the pair slides to 1.29000-1.29500.