Markets started this week with an optimism that suddenly started last
Friday after S&P 500 broad market index jumped off the correction to a new
record highs.
There is no particular understanding of the recent rally, as some
investors consider it has started after some Federal Reserve representatives
claims that the monetary policymaker would me more tolerant to any QE tapering
amid spread of the new more contagious COVID-19 “Delta” strain. Some were
suggesting that Chinese unexpected interest rate downgrade has granted
commercial banks extra $130 billion, and this liquidity supported stock
markets.
Nevertheless, the rally continues as S&P 500 peaked new all-time
highs above 4380 points. And this record came just ahead of many important
events this week that may amplify this rally.
Investors are waiting for June inflation data in the United States that
would be released today. The corporate earnings season for second quarter has
started with JPMorgan and Goldman Sachs to report this week. On top of it Fed’s
Chair Jerome Powell will testify in the Congress.
We should expect strong earnings reports by banks, including their
revenues from investment divisions. Mr. Powell is likely to continue dovish
rhetoric while inflation figures may bring another unpleasant surprise rising
above 4.9% in June. However, we could hardly apply the effect of this grim
cocktail on the markets. So, sit and wait tactics on Tuesday might be a better
option amid this turbulence.
Besides Jerome Powell would make another testimony in the Congress on
Wednesday. Inflation in the United Kingdom and PMI index in the U.S. would be
released on Wednesday too. Investors would closely monitor Chinese GDP,
industrial production and retail sales figures. Chinese economy is expected to
slow down and that could be a bad signal for commodities markets.
So, the news background is intense this week so it might be better to
follow technical picture. Technically, for S&P 500 index we may suggest the
following. It would be very risky to open sell positions as the index is above
4280 points and should reach the resistance at 4550 points. If the index would
fall below 4280 points than a downward direction would become a prime scenario
with targets at 4190 and 4120 points.
For Brent crude critical support is located at $74.50 per barrel. Once
broken through prices may fall to $70 per barrel. But if prices remain above
the critical support they would likely to rise to $75.80 and $76.90 per barrel.
The latter level would be a good opportunity to open sell positions with
targets at $75.80 and $74.50 per barrel.
Gold is not a particular interest as currency and stock markets are not
distinguished their direction. Gold prices would likely to remain close to
$1800 per troy ounce.
Currency
market situation has changed. The EURUSD is still trading below 1.19300 making
a decline to 1.15300 a basic scenario. On the other hand, if the pair would go
up above 1.19300 the rise to 1.20700 or even to 1.21600 is possible. Sell
positions on these levels would be interesting to open with targets at 1.19300
and 1.20700.
GBPUSD
has confirmed strong support level at 1.37500, but this time this level might
be broken. If this would be the case the pair may slide to 1.34400. In the
alternative upside scenario with a rise to 1.39300 sell positions with the
target at 1.38450 and 1.37500 would be interesting to open.
The
USDJPY has significant chances to plunge to 106.50 once 109.65 level would be
passed through. In the alternative upside scenario with the rise to 111.60 sell
positions with targets at 110.60 and 109.65 would be interesting to consider.