A nightmare
week for the U.S. stock market is ending. Stock indexes failed to perform any
resistance amid fears of the announcement about monetary policy tightening after
the Federal Reserve’s (Fed) meeting next week. The Dow Jones index lost more
than 3%, the high-tech Nasdaq 100 index dropped by 5.5%, and the S&P 500
broad market index fell by 4.2%.
There wasn’t
really any movement regarding macroeconomic data this week. The corporate
season in the United States turned out to be better than expected, but the
market’s reaction was quite the opposite, as the market performed panic selloffs for any
minor reason. This was notedly seen with Neflix stocks. U.S. President Joe
Biden amplified the hawkish expectations towards the Fed’s tighter than
expected monetary policy by entitling it as the major tool for taming
inflation. "A critical job in making sure elevated prices don't become
entrenched rests with the Federal Reserve, which has a dual mandate: employment
and stable prices,” Biden said on the day before his one-year anniversary of
his inauguration.
S&P 500
futures initially dropped from 4680 points to the support of 4580 points,
declining further to the downside targets at 4350-4400. Its price even touched
the low of 4438 points on Friday morning, the lowest since October 15, 2021.
Technically,
we may expect the S&P 500 index to stabilise at current values. But next week looks very negative as some
unpleasant surprises may be delivered by the Fed and plunge the index to 4300,
or even to 4250 points. The pressure may ease at some point on Friday, but if
the S&P 500 closes this week below 4580 points, the downside scenario of
the 4350-4400 area would be a single option.
Brent crude
prices were attempting to hold above $89.50 this week but failed and opened
below $85.60 on Friday. If they finally fail to do so on Friday, there may be a
good chance for a correction next week, or even a downside turnaround. The Fed’s
meeting may serve as a trigger for this downside move. So, traders may see more
sell opportunities next week.
Gold prices
finally reversed to the upside, jumping to $1840 per troy ounce. This upside
period may last through March 2022, and we may expect gold prices to go up to
$1910-1930 per ounce. In order to do so, geopolitical tension should continue
during this period for gold prices to be able to ignore rising U.S. 10-year
Treasuries yields that rose to 1.90% on Friday morning.
EURUSD
scaled back to the support at 1.13300 but still has chances to go up within the
existing upside channel with the targets at 1.15200-1.15300. If the pair fails
to decline below 1.12500-1.12800 before the Fed’s meeting, signaling the start
of the downward trend, it may recover next Thursday or Friday. So far, it would
be wise to wait for the developments after the central bank’s meeting next week
to open any positions.
GBPUSD
almost performed a turnaround, but it should be confirmed by the strong support
level at 1.35700-1.35800,however, some downside spikes may be expected. In this
case that the 1.34800-13500 zone is reached, it would be very interesting to
open buy positions. Sell opportunities would be interesting at the resistance
at 1.366001.36800 with the targets at 1.35800-1.36000.