The Federal Reserve (Fed) Chairman Jerome Powell has finally admitted a possible recession in the United States after a sharp hawkish interest rate rise. Such a confession was extremely hard for Mr. Powell, but it seems he had no other choice.
June PMI readings that were published just before his testimony before U.S. Congress on Thursday, left investors and analysts wide-eyed as the Service PMI dropped to 51.6 from 53.4 a month before, a very sharp decline. The Production PMI plunged to 52.4 points from 57.0 points in May. If Mr. Powell decided to ignore this data, he would have looked rather stupid in front of the senators that could have come to the conclusion that he clearly has a mental disorder.
Secondly, ignoring economic realities in order to suppress inflation would cause the stock market to spiral down without any chance of a rebound this summer. By recognising the possibility of a recession Fed’s front man presented his adequate vision of the economic developments and created hopes for a possible slowdown of monetary tightening by the Fed in the case of further economic deterioration in the United States.
Such verbal gymnastics helped the S&P 500 broad market index to recover over 3800 points and seek further upside opportunities. If the index continues to score any further, it may signal the upside pattern on Monday. This would be a very aggressive long position but it could be justified before the next Fed meeting on July 26-27.
Crude prices are trying to stage some drama as they are showing some inability to reach new highs. And this is likely a bullish trap as there is enough time for Brent crude to outshoot recent highs to rally towards the ultimate targets at $160-180 per barrel. The drop below $110 per barrel may be confusing, but there are no reasons to change the aggressive upside scenario.
Gold prices continued to move to the downside and dived to $1820-1825 per troy ounce. If prices continue to drop any further, they may accelerate towards the $1730-1750 targets. Short trades opened at $1860-1880 remain intact, while it may worth considering new trades if the price recovers to this range.
EURUSD remained within the upside pattern with a primary target at 1.07000-1.08000. But the resistance level at 1.05300-1.05500 may stop this upside. So, there no good entry points next week.
GBPUSD has entered a downside pattern with a support level at 1.22200-1.22400. The pattern also has a strong resistance level at 1.23200. So, it is better to wait until the pair bounces to the resistance level to consider short positions. In the other case there are no good entry points so far.