The U.S. Stock market performed a sharp rebound of 5.2% last week, primarily on Friday when stocks were up by 3.2%. But this seems to be no reason for optimism as investors witnessed recession possibilities rise after the Federal Reserve’s (Fed) Chief Jerome Powell admitted that there is a chance for this to become a reality. Investors should be also aware of the fact that such a sharp rebound usually happens during bearish markets. And this where the market has been positions since June 13.
So, this rebound is seen to not be sustainable. Nevertheless, many bullish enthusiasts from Wall Street have started to convince investors that the market could gain 10-20% by the end of this year. Such affirmations are seen to be way too optimistic as inflation in the United States, that is plummeting the market, remain close to 40-year peaks. Economic activity in the United States is contracting rapidly and PMI readings confirm that. This week the Core Personal Consumption Expenditures (PCE) index is to be released. It is expected to remain at 5.10% year-on-year for the Q1 2022. This index is one of the primary indicators that the Fed i monitors when making interest rates decisions.
So, what should we do? Unfortunately, there is nothing we can do, but wait for the official confirmation of the start of the recession by the Fed and other central banks. However, such a confession is likely to be delivered only after statistical confirmation is received. This is likely to happen late July when official figures for Q2 2022 GDP in the United States will be released.
So, Chair Powell and his colleagues from the European Central Bank and the Bank of England may play around with the market for some time, but they are unlikely to take on soaring inflation. They just need more time to tighten monetary policies as much as possible so they can have solid ground to base other quantitative easing in autumn to cushion the recession blow.
The S&P 500 broad market index changed the pattern to the upside with the target at 4000-4100 points by the end of July. Those who want to attend this final rebound may join it with a minor trading volume. Conservative investors are advised to wait for a signal to initiate short positions in the second half of July.
The oil market is the most interesting story now. Brent crude prices are set for the rally towards $160-180 per barrel within the next two weeks. So a long position for crude at $112.70 per barrel looks extremely attractive. G7 countries are innovating new ways to lower crude prices by limiting prices for Russian oil. But this could have quite the opposite effect. The actions of the Organisation of the Petroleum Exploring Counties and allies (OPEC+) including Russia is very interesting in this regard. OPEC+ is set to hold a meeting this week.
Gold prices continued to move to the downside and dived to $1820-1825 per troy ounce. If prices continue to drop any further, they may accelerate towards the $1730-1750 target area. Short trades opened at $1860-1880 remain intact, while it may be worth considering new trades if the price recovers to this range.
EURUSD remained within the upside pattern with a primary target at 1.07000-1.08000. This week started with the resistance level at 1.05300-1.05500 being passed as the pair reached above 1.05800. There are still no good entry points now. So, it is better to wait for the downside to 1.04500 and below to open long trades.
GBPUSD remain in a downside pattern with a support level at 1.22200-1.22400. The pattern also has a strong resistance level at 1.23200. So, it is better to wait for the pair to change the pattern for the upside to consider long positions.