The last trading week of May will finish with the inflation data in the U.S. and a new 2022 draft budget that would be presented by Joe Biden’s Administration.
Markets are tensed now, and may spring a mine of volatility any moment. However, investors are seen to neglect correction signals pushing prices of risky assets higher and higher, while the U.S. Dollar is sliding lower.
The second estimate of U.S. first quarter GDP was released on Thursday leaving the GDP unchanged at 6.4%. GDP price index, instead, was revised to 4.3% from 4.1%. Core PCE prices index was upgraded to 2.5% from 1.3%. That emphasize that the inflation threat in the United States is more than real.
Reserve Bank of New Zealand seems to be getting a point when it said in its statement that it will continue loose monetary policy stance until second half of 2022, leaving room for suggestion of early interest rate hikes. Higher inflation is also a concern for Dank of England as Andy Haldane, the BOE’s chief economist, has also been sounding the alarm about inflationary risks, while BoE’s governor Andrew Bailey played down this risk saying that the expected acceleration in prices this year will likely be temporary.
Fed seems to be the only monetary policymaker that is waiving all inflation concerns with an art worthy of a better cause, refusing even to discuss tapering down its monthly $120 billion stimulus program.
On Friday another set of inflation data in the U.S. would be released. Higher rates of inflation are expected. However, we saw already that the market is simply ignoring such correction signals, and we may expect the same reaction today.
Technical picture for the S&P 500 broad market index suggest a downside opportunities after it failed to reach 4230 points, leaving a downward scenario with the target at 4175 points and further down to 4060 points intact.
Brent crude prices rose above $68.40 a barrel after crude reserves unexpectedly contracted in the U.S. by 1.66 million barrels. Prices continue to climb with the next target at $69.60 a barrel. Once this target would be reached it would be an interesting sell opportunity with the target at $68.40 a barrel.
Gold prices have finally reached the $1900 an ounce landmark and anxiously stepped back below this level following rising yields of 10-year Treasuries to 1.61%. Technically the picture may seem like a reversal pattern with a target at $1800 an ounce. However, we should not rush to open sell positions before we see a confirmation signs.
The Greenback is still under pressure despite an overall positive technical picture for it. The EURUSD returned to an important support level at 1.21850. Once it would be broken, the pair may fall to 1.20500.
The GBPUSD is entrapped above the resistance level at 1.42100 and 1.40100. The pair may continue to gain to 1.42500, where it would be interesting to sell with the target at 1.41200.
The USDJPY is unleashing its upside potential as the pair jumped to 109.50. If the pair continue to rally to 110.60 it would be interesting to sell at this point.