Investors will continue to follow stories that began last week around the corporate reporting season and will also focus on speculations about future Federal Reserve (Fed) actions. Three Fed officials will testify this week, and that will be extremely important as this will leave a period of time for markets to speculate before the regulator will begin to put rate actions in motion at the start of next week.
The first earing reports from JPMorgan (JPM), Wells Fargo (WFC), and Citigroup (C) were well above market expectations, and that is a good signal. On the other hand, deposit outflows in March may highlight that large banking institutions have substantially benefited from the zero-sum game hoovering deposits from troubled banks, and leaving smaller financial institutions in a state of undress.
Bank of America will publish its earnings report this week accompanied by some less-known banks. So, it will be worth paying attention to possible volatility spikes during the publication of these reports. Streaming giant Netflix and EV maker Tesla will also present their Q1 2023 financial results that may confirm weakening of the consumer sector in the U.S. after a recent retail sales March report was down by 1.0% month-on-month.
Fed Governor, Michelle Bowman, John Williams, a president of the Federal Reserve Bank of New York, and Fed Governor, Christopher Waller, will speak this week to prepare markets for the Fed interest rate decision on May 3. It would be logical to expect their rhetoric to be moderately hawkish as markets are comforted with interest rate hikes of 0.25 percentage points that the Fed is likely to announce early in May. Highlighting the uncertainty of the future interest rate actions that the Fed may take would be a wise move to support stock markets. Investors from their side have a last chance to convince the regulator not to hike interest rates any further, but a serious market correction is needed to support this idea.
Technically, the S&P 500 index has an upside formation with targets at 4150-4250 points that have already been met but this may change soon. The index is now in a reversal zone and is likely to continue moving inside it by the end of this week. If the index survives above 4000 points, more ambitious upside targets at 4500-4600 points may emerge. In an alternative scenario, the index may tumble and even spiral down to a deep correction.
Oil market traders have all eyes on the resistance of $86 per barrel of Brent crude. If this resistance level is crossed that will be a nightmare for the Fed as it will open the way for crude prices to rise to $94-96 per barrel. If this is the case, the downside trend will be eliminated. If the resistance survives, the recession scenario will become the leading factor dragging down prices to $40-60 per barrel of the Brent crude benchmark.
Gold prices are moving inside the mid-term upside formation with targets at $2000-2100 per troy ounce by the middle of 2023. Prices may perform another attempt to reach $2080-2100 per ounce. In case of a bounce prices are likely to return to $1890-1900, otherwise they will go up. However, prices are likely to tumble before they can resume climbing towards extreme targets at $2400-2500 per ounce.
The U.S. Dollar is expected to be supported by the emerging upside signals in April. 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 are intact. The decline of the EURUSD to 1.05000-1.05500 was used to close half of the trade. The other half should be continued until the targets of 1.03000-1.03500 are met.
Besides, short positions for AUDUSD from 0.66900-0.67400 with the target of 3500 points and the same stop-loss order could be considered interesting. Short positions for GBPUSD from 1.23300-1.23800 with a target of 5000 points and the same 5000 points for a stop-loss order could be considered. Rising risks and market volatility could prompt trade volumes to be reduced.