The
situation in the financial markets is seen to be deteriorating by the end of
the week as the fog of optimism that blinded investors is fading. U.S. stock
indexes are going down with the S&P 500 broad market index losing 1.3% to reach
4078 points. The U.S. 10-year Treasuries yields are reasonably high at 3.66%,
while the Dollar lags behind with only a rise of 0.6% this week.
Investors
are still fascinated by the remote possibility of a stock rally and might
consider the current market roll back as temporary amid the hawkish rhetoric of
Federal Reserve (Fed) officials that followed the ultra-strong Non-Farm
Payrolls report for January.
Investors
hope that weaker macroeconomic data for the United States will follow, and
inflation data next week would restore hopes for a swift curtailing of the Fed’s
interest rate hike cycle. There is minor room for such hopes to become reality.
If the stock market fails to perform a positive upside next week and starts
moving down, it may indicate a large decline in the market.
Technically,
the S&P 500 index continues within the upside formation with the primary
target at 4100-4200 points. The index reached the resistance at 4180-4200
points and went into the downside correction to the support the level at
4080-4100 points. The index is expected to bounce towards the nearest
resistance at 4180-4200 points, or continue to drop to 4000 points.
Brent crude
prices have failed to go below the support at $77-79 per barrel and are trying
to recover to $87-89 per barrel. The activity is rising along with an
uncertainty. In this situation it is better to wait before prices break out of
the wide range of $79-89 per barrel in either direction. 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 fallen below $1880-1900 per
ounce, increasing chances of a further downfall to the support level at
$1790-1810 per ounce. Odd price growth over the last weeks may point to a
possible change of trend to the downside during elevated volatility to rewrite
last year’s lows.
The money
market is still ignoring any upside signals for the American currency. After
the release of Non-Farm Payrolls data, the Dollar has gained momentum and may
continue to strengthen further. Considering the high volatility in the market,
it is better to place orders that are 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.