It did it again. Inflation in the United States in July slowed down to 8.5%, lower than forecasted by Wall Street’s 8.7%, and much lower than in June, when it hit a 42-year high of 9.1%.
U.S. Treasuries yields dropped, and investors had a sigh of relief. Now market optimists have begun to test the 200-days moving average at 4179 points. The baseline scenario suggests that the possible outcome will bring no good. Monetary tightening of the Federal Reserve (Fed) and the deep inversion of the Treasuries yield curve would likely damper any further upside efforts, and it may seem like trying to put toothpaste back in the tube. It looks fascinating, but all in all, it would hardly be successful to build up an upside trend.
However, the real question is where is the upper margin of this uptick located. The previous forecast suggested that a breakthrough of the 200-days moving average would push the S&P 500 to 4250-4300 points. But the index is already there. So, it is time to think of possible short opportunities.
So far, no signals for a possible entry point to open short positions can be seen and neither is the timing for such short operations right as the first half of August could be false start for a stock market drop. However, 20% of the funds reserved to open such short positions may look like a proper start to open small, short positions. In this case, such cautious steps seem justified.
The oil market situation is the most complicated story of the month. Brent crude prices moved above $100 per barrel with no reaction on growing oil inventories in the United States, or to the International Energy Agency (IEA) and Organisation of Petroleum Exporting Countries (OPEC) monthly report. The upside scenario with a primary target at $135-145 per barrel and extreme secondary targets at $160-170 per barrel remains intact. However, no triggers that could move crude prices further up can be seen at the moment.
Gold prices continue to move to the upside as they hit $1800-1820 per troy ounce. It would be very difficult for prices to surpass this level, so it is no wonder prices scaled back to $1790 per ounce. Any long positions are very risky to be opened now. So, it is better to wait for gold prices to show clear signs of a reversal to open long-term short positions in September with targets at $1350-1450 by the end of October.
The FX market was clearly excited by lower-than-expected July inflation figures in the United States that were released this week. EURUSD broke through a strong resistance level at 1.02200, and even surged above the 1.02800-1.03000 area. However, no good positions to open a deal in any direction can be seen.
GBPUSD slowed down but it was in the upside formation in the beginning of this week. This fact may signal a possible correction to 1.20000. But, instead of a decline the pair crashed the resistance at 1.20900-1.21000 on the U.S. inflation figures and jumped to 1.22400. If you have short positions open, you could keep them open until the pair returns to 1.20900-1.21000. In case the Cable continues to rise above 1.23000 these positions should be closed. No other good entry points for new positions can be seen at this moment.