The beginning of the new week was not inspiring as stock indices are
struggling even ahead of corporate reporting season in the United States.
European stock indices edged down on Monday as well as U.S. stock indices. In
addition, yields on U.S. Treasuries resumed climbing.
Maybe it is an incertitude of investors that would fade as Wells Fargo,
Goldman Sachs and JP Morgan will publish their expected to be strong quarter
reports. Maybe it is something more beyond as S&P 500 broad market index
crossed the resistance level at 4120 points as inflation expectations grew in
March to 2.5% from 1.7% in February.
So, investors are quite nervous today as March inflation readings will
be published late evening in Tuesday. As we could remember the combination of
rapidly rising yields in the debt market and high inflation could spark the
rise of volatility and large market and extensive stock market corrections.
The S&P 500 broad market index is on the crossroads now as it has a
20-30% chance to break through the resistance at 4120 points with a possible
target at incredible 4485 points. The other scenario considers correction to
3900-4000 points and is seen more likely. But even in the latter scenario
traders have to perform maximum caution as corporate reporting season according
to Refinitiv may be very strong with earnings of S&P 500 companies up by
25% compared to the first quarter of 2020.
Crude oil is waiting for the trigger to initiate correction that could
crumble the support level at $62.3 per barrel of Brent crude. If this trigger
appears in the market Brent crude prices may tumble to $58.70 per barrel this
week with a far lower targets beyond.
The progress in U.S. – Iran deal negotiations could become such an
appropriate trigger. If this deal would be resumed Iran could add as much as
1.5-1.7 barrels per day to the market.
Gold prices returned to the accustomed trading range at $1700-1750 per
troy ounce. Rising U.S. debt yields pushed prices down from the upper margin to
$1730 per ounce. However, current ten-year Treasuries yields at 1.68% are not
enough to pressure gold prices below $1700 per ounce. So, a gold prices are
likely to continue moving sideways.
Currencies
are still mixed with no clear direction. The EURUSD is locked above weekly
support level at 1.18500 and should be rising towards 1.19600 and 1.21000. But
we do not suggest opening long positions. Instead we recommend to use
resistance levels as a good short opportunities.
The GBPUSD
has a long road to decline as 1.38200 resistance level is seen attractive to
open sell positions with targets at 1.37200 and 1.36100, or even lower at
1.32100.
The
USDJPY is likely to decline and the resistance level at 110.00 would serve as a
good opportunity to open sell positions with targets at 109.00 and 107.60.