The framework of the incoming crisis is seen to be finally shaped this week. Regardless of the Nonfarm Payrolls data or upcoming inflation figures markets seen to be stalling into a new crisis.
The crushing of the debt market, when the yields of the U.S. 10-year Treasuries fell below the yields of 2-year debt, always resulted in a market downturn in the United States. This doesn’t mean an immediate downturn. But this time it is likely that there will be not too much time before it will start. It is really hard to imagine how stock indexes would rise or even run flat under such mad borrowing rates. Positive developments in the markets after a possible further rise of the yields on 10-year debt above 5.0% predicted by JPMorgan and BlackRock top officials are seen unrealistic.
It looks more like coordinated efforts to push global economy towards hard landing. Orchestral maneuvers of the Federal Reserve are well accompanied by prominent financial market makers. This hard landing may eventually solve inflation issues and justify another wave of stimulus measures on national levels. A military conflict in Ukraine and complete silence of the Organization of the Petroleum Exporting Countries and its allies, known as OPEC+, to the stalling crude prices is not a part of this scenario. So, we may have a classic deflation shock story, when a heavy sell-off of assets may be executed. The United States and China may avoid military conflict over Taiwan and escalation of sanctions, which would slightly improve this downside scenario.
The macroeconomic data in the United States is not very much important in this regard. Nevertheless, Nonfarm Payrolls data for September and inflation data next week will play a significant role in short-term developments. Consensus indicates that Non-Farm Payrolls in September will be lower than in the previous month. Our statistical modeling confirm a slowdown in this data with 120,000-187,000 new jobs created in September. The unemployment level is seen unchanged at 3.8%, or slightly lower at 3.7%.
Technically, the S&P 500 index downside formation with a primary target at 4100-4150 points and extreme targets at 3700-3800 points has not changed. The nearest support is at 4190-4210 points. Short trades could be considered at 4380-4430 points.
Brent crude prices dived below $92.00-94.00 per barrel, and dropped to the support at $83.00-85.00 per barrel. If they fell below it the downside scenario would be activated. Ifs targets are at $55.00-65.00 per barrel of Brent crude.
Gold prices are moving inside the mid-term upside formation with targets at $2000-2100 per troy ounce that have already been met. But, the situation has changed dramatically as the important support level of $1980-2000 per ounce was smashed. Prices have dived deeper to $1800-1820 per ounce target area. It is important to monitor further prices developments to understand where prices may go next.
The Greenback is weakening and it is likely to continue down. However, it may also turn to the upside to the new highs on the recession fears. A long trade with a small amount for GBPUSD from 1.23300-1.23500 with a target at 1.26200-1.26400 is intact. The first target is at 1.2400-1.24500. This is the level, where the decision to keep the trade or close it should be made. The long trade in the AUDUSD from 0.63800-0.64000 with a target at 0.66500 and the stop-loss at 0.63200 is still open.