Weekly Summary: Investors Are Waiting for a Dovish Powell

The week ends in uncertainty. Macroeconomic data brought positive signs, but no rally of the S&P 500 broad market barometer was detected, as it added moderate 0.3% to 4574 points. Brent crude prices rose by a modest 0.6% and dropped to the vicinity of the $80.00 per barrel after Organization of Petroleum Exporting Countries and its allies, known as OPEC+, agreed for production cuts of 2.2 million bpd in Q1 2024.

PCE Price Index, a Federal Reserve’s (Fed) favourite gauge of inflation, surprised investors with 0.0% MoM in October compared to the expected 0.1%. But, it seem that investors were not happy at all. U.S. 10-year Treasuries’ yields rose to 4.33% from 4.26% despite falling for the three consecutive days before the publication. Bets for early Fed interest rates cut in March dropped to 46.3% from 48.6%. Investors might be scared by OPEC+ recent decision of production cuts in Q1 2024 that may push inflationary risks up. The strong U.S. Q3 GDP at 5.2% vs 4.9% expected could also worry them. On the other hand, Investors could be selling the fact, and PCE numbers could came in as such.

Another positive factor affected investors’ minds. One of the Fed’s Board of Governors members, Christopher Waller, unexpectedly said that the Fed might slash its Fund rates within coming months of spring if inflation keeps declining steadily. This statement pushed bets for Fed’s benchmark interest rates cut in March to 48.6% from 21%. He was the first from Fed officials to say this. However, investors want Fed’s Chair Jerome Powell to confirm it. This could flag a start of the Christmas rally in the stock market.

Technically, the S&P 500 index has almost passed a potential reversal period and would enter a safer territory next week. The resistance will move to 4650 from the current 4550 points. It is of paramount importance for the S&P 500 index to finish Frida and Monday without diving below 4350-4370 pints support. Otherwise, the Christmas rally could be spoiled, and may turn into correction.

OPEC+ made its move. The production is cut by additional 1 million bpd. This may result in a 30% rise of crude prices in coming months. Meanwhile, prices are stagnating below the resistance at $83.00-85.00 per barrel of Brent crude. The nearest support is at $74.00-76.00 per barrel. This is where prices might go if they fail to recover above the resistance.

Gold prices are moving inside the mid-term upside formation with targets at $2000-2100 per troy ounce that have already been met. Prices broke through the resistance at $1990-2010 per ounce, but they have not retested it. So, there are equal chances for prices to continue up towards $2100 per ounce and for a roll back to $2010 per ounce.

The Greenback is hovering inside its primary correction targets at 1.08500-1.09500 against the Euro. Any further correction is largely associated with a Christmas stock rally. In this scenario, the EURUSD may rise towards 1.12000-1.13000. Alternatively, the Greenback could resume is strengthening towards the parity with the single currency.