Weekly Focus: Netflix and Tesla, ECB and BoJ

This week is expected to be very interesting not only from the short-term perspective, but also in means of understanding a possible crisis scenario this autumn in detail. The Q2 2022 corporate earnings report season is gaining steam after U.S. banks presented weak reports last week.

Bank pf America and Goldman Sachs will report on Monday, but they would hardly change the weaker tune of this reposting season. Investors are hoping for a miracle after a strong June Non-Farm Payrolls report and growing sales by 1% in June. Thus, they are betting on Netflix and Tesla being forerunners for the entire tech sector reporting season. Investors expect the number of Netflix paid subscribers to be down again, while Tesla may present an optimistic report considering its sales and production numbers.

This Thursday the Bank of Japan (BoJ) may deliberately lose another opportunity to fight off rising inflation. It may not be the right moment this week, but in a month’s time the BoJ will be forced to switch to the monetary tightening mode. The European Central Bank (ECB) has surrendered as it is preparing for the first interest rate hike since 2011. Consensus suggests that interest rates would be raised by 25 basis points, which is seen inadequate as other central bankers are moving by 50-100 bp. Investors would also be attentive to any steps the ECB may take towards the leveling up of debt yields throughout the EU.

There are many other events this week that may affect markets, but the S&P 500 broad market index is likely to remain in a downside formation reacting primarily to corporates news this Wednesday and Thursday. The index is growing rapidly towards the resistance at 3920-3930 points and may change its formation to the upside with the target at 4100 points if the resistance is broken.

The oil market is left uncertain after U.S. President Joe Biden’s voyage to Saudi Arabia and the Middle East. Saudis promised to raise oil output to 13 million bpd, but only after the running Organisation of the Petroleum Exporting Countries and allies’ (OPEC+) agreement  expires this September, and if Russia dramatically decreases its oil production. This mean that Saudis are now willing to slash high prices on crude. So, crude prices are picking up moderately with Brent crude prices up by 2.7% on Monday. The upside scenario with primary targets at $135-145 per barrel and extreme secondary targets at $160-170 per barrel is intact.

Gold prices continue to decline with a slight rebound to $1720 per troy ounce after the U.S. Dollar lost ground on Monday. The range of $1720-1740 per ounce is very strong and may gravitate prices back up. Short positions opened at $1860-1880 may be justified to be closed by half and even possibly by another quarter point by the end of July.

EURUSD has changed its formation to the upside targeting the range of 1.03500-1.04500 by the end of this week. Any buy options from 1.00700-1.00900 are at high risk as the ECB will only make its interest rates decision on Thursday. The resolution of gas supplies from Russia via the North Stream is expected on July 22 and may affect the Euro exchange rate too.

GBPUSD may rebound to the upside towards 1.21500-1.22500 by the end of this week. Long positions could be considered to be opened at 1.18700-1.18900.