The most
important event of the week will be on Tuesday when U.S. President Joe Biden
from the Democrats’ side is scheduled to meet the House speaker, Kevin McCarthy,
to talk about lifting the debt ceiling. The S&P 500 broad market index will
enter a reversal zone that will last until the end of May.
Stock
markets are prepared for a negative scenario in the talks, as Democrats must
find a swift compromise that could be considered as an invitation for a furious
political standoff this fall between GOP and Jacksonians.
Thus,
traders have to monitor the S&P 500 index if it goes close to 4120-4140
points, which could become a key point for its future direction. If this
support survives, the index may spike to close to 4260-4300 points for a short
time. Otherwise, it is likely to drop to 4010-4030 points with a possible
acceleration towards 3750-3850 points.
Joe Biden
has confirmed that he is planning to leave for G7 summit in Hiroshima on May
17. This is likely to mean that he is confident that a compromise over the debt
ceiling will be reached by that time. Otherwise, he is unlikely to participate
in the summit, which would be a very embarrassing signal for other G7 leaders.
Apart from
this event, this this week looks like a pretty regular one. U.S. retail sales
data will be released on Tuesday; other macroeconomic data on Eurozone, China, and
different large economies will be published throughout the week. The Federal
Reserve (Fed) and European Central Bank (ECB) officials will testify this week.
But all this would hardly interest investors before even a minor threat for
U.S. technical default is eliminated.
Technically,
the S&P 500 index has an upside formation with targets at 4500-4600 points.
The index is resting between the resistance at 4200-4220 points and the support
of 4080-4100. The resistance will move up to 4260-4300 points, and the support
is expected to move to 4120-4140 points by the end of this week. A breakthrough
of the support will signal a very likely U-turn to the downside.
The
recession scenario chances are rising in the oil market as Brent crude prices
continue to tumble towards $40-60 per barrel, which is the recession target.
Prices tested the resistance at $77.00-79.00 per barrel and are moving down to
the range of $67.00-69.00 level per barrel. Once they breakthrough this level
they may accelerate further down. However, this will largely depend of the
efforts of the Organisation of the Petroleum Exporting Countries and its
allies, known as OPEC+, to stabilise prices.
Gold prices
are moving inside the mid-term upside formation with targets at $2000-2100 per
troy ounce that have already been met. A fierce struggle for the important
level of $1980-2000 per ounce resulted in the upside scenario with targets at
$2070-2090. Prices were very close to this target, but rolled back to the $2000
support level. Another testing of the resistance at $2070 is likely since
prices are above the crucial support of $1980-2000 per ounce.
The
monetary market situation is complicated. 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 closed at 1.05000-1.06000 considering recent developments. This week
this target is likely to be reached.