Stock Indices Run High

The second trading week in March is full of positive sentiment. Stock markets are on all-time highs as S&P broad market index soared above 3950 points, Brent crude prices went up to $69 a barrel, and U.S. Dollar is gradually loosing strength to other G7 currencies.

Investors are full of optimism after U.S. congress has finally approved $1.9 trillion relief bill that according to U.S. Treasury Secretary Janet Yellen is “the most important thing is to get our economy back on track”.

Maybe it is so. Although some doubts could be expressed considering huge misbalances in the stock and commodities markets. But investors are desperately waiting for the fresh tens of billions (up to $150 billion) dollars that Americans would bring to the market after receiving direct payments of $1,400 per person. This money may allow some large market players to jettison some overvalued shares that may suffer sharp correction in case of another Treasuries’ yields rally.

Joe Biden may sign the relief bill today, so that every American will receive $1,400 cheques by the end of March. Thus, markets may witness the increasing volatility next week with making investors nervous. The Federal Reserve may support such scenario if the monetary policymaker would express its little concern over rising inflation that topped 1.7% year on year, and poker face rising Treasuries’ yields. Even the European Central Bank waved its concern over government bonds sell-off by increasing the pace of the bond purchases within the PEPP program.

Until the Americans waiting for their coronavirus relief money market may continue their optimistic rally roughly by the mid of next week. The S&P broad market index has passed over weekly support level at 3850 points and may now move towards next resistance levels at 3990 and 4020 points. Would it succeed to meet these targets is hard to say at the moment. There is no intention to buy the index at such high prices. So it is better to make a pause until the next week when there is more light in future market direction.

Oil market experiencing technical correction after falling to $67 per barrel of Brent crude. No prices are moving towards the resistance at $69.7 per barrel. Crude reserves data turned negative this week as reserves in the United States surged by 13.8 million barrels just in one week beating modest upward expectations of 800,000 barrels. But a strong support for Brent crude at $67 per barrel and relief bill expectations hindered any further decline in prices.

Next resistance levels for Brent crude are at $70.60 and $71.3 per barrel. Again any purchases at such high prices are not desirable and better to be avoided until the next week.

Gold prices managed to recover to $1730 per toz amid declining Treasuries’ yields from 1.61% to 1.48%. However, gold may perform another effort to dive to $1700 per ounce. Any long-term targets would be clear after FOMC meeting next week.

The Greenback is losing its positions on the FX markets waiting for the Fed to direct it next week. However, volatility is expected to be limited before the meeting.

The EURUSD this week is trying to return to the resistance level at 1.20400. So far looks like a poor effort and it would hardly be better today. A consolidation at 1.19500 is more likely.

GBPUSD is starting its run from the support at 1.39200 with a target at 1.40400. However, the pair has little steam to hit this target this week, and will likely end it close to 1.39200.

The USDJPY is sending mixed signals. On one hand the nearest resistance level is at 110.50, on the other hand, technical picture suggest a reversal pattern at 108.5-109.00. May be it is better to take a breather here too until the next week when Fed’s Chair Jerome Powell reiterates his view on the market outlook.