This week
was rather quiet with no surprises. The S&P 500 index edged lower by 0.2%
to 3982 points. Brent crude prices rose by 2.0% to $84.9 per barrel, while the
U.S. Dollar index retreated by 0.7% to 104.68 points.
Investors
were participating in a tug-of-war between strong macroeconomic data from China
and hawkish remarks from Federal Reserve (Fed) officials. Unexpectedly high
business activity indications in China confirmed its rapid recovery after the substantial
lifting of COVID restrictions and the reopening of the economy. This fueled
quite a lot of optimism in the markets.
On the
other hand, Fed officials continue to bombard investors with hawkish rhetoric
to beat out inflation expectations. Most of the week this helped to keep the
stock market under pressure, as the S&P 500 index tested the support level at
3920-3940 points. Suddenly, Atlanta Fed President, Raphael Bostic, said that the
Fed would be in a position by mid to late summer to pause interest rate hikes
after bringing them to 5.0-5.25%. Later he added that he is going to stay open to
higher interest rates over the coming months in case economic data comes out
stronger than expected. The S&P 500 index jumped to the 3982 points on the
news.
Services
Purchasing Managers’ Index (PMI) data, that will be released on Friday, may
cool investors optimism as it is expected to be strong, and may eventually
prompt the Fed towards additional interest rate hikes. Other Fed officials that
will be speaking next week are expected to add some hawkish tunes to the market
to tame rising inflation expectations.
Technically,
the S&P 500 index continues to move down to 3650-3750 points. The index is in
the middle of the strong resistance level at 4010-4030 points and the support
level at 3920-3940. Testing the support is a more likely scenario.
The oil
market is nearing a decisive moment, as Brent crude prices are consolidating in
the middle of the wide trading range of $79-89 per barrel. This time the price
is ready to breakthrough and recession logic suggests that prices are likely to
go down.
Gold prices
are moving inside the mid-term, upside formation with targets at $2000-2100 per
troy ounce by the middle of 2023. Prices have failed to dive below the support
level at $1790-1810 per ounce, and are recovering to $1840-1850 per ounce.
Still, the support level at $1790-1810 per ounce should be monitored. If prices
pass this support level and continue down, then the scenario of a possible
change of trend to the downside may become a reality. In this case prices may
rewrite last year’s lows of $1600-1650 per ounce.
The money
market has finally followed upside signals of the American currency. The Dollar
may continue strengthening. Considering the high volatility in the market, it
is better to place orders attached to longer perspectives. Short trades for
EURUSD opened at 1.06700-1.07200 with a downside target at 5000 points below
the opening level and the same 5000 points for a stop-loss order should be considered
very attractive. The decline of the EURUSD to 1.05000-1.05500 could be used to
close half of the trade, and the other half should be continued until the
targets of 1.03000-1.03500 are met.