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.