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  • Weekly Focus: Speeches from Central Banks’ Officials, PMI and S&P 500 Slide

Weekly Focus: Speeches from Central Banks’ Officials, PMI and S&P 500 Slide

This trading week may seem boring, as the macroeconomic calendar is missing top data that would affect markets. Although this is the case, there are some important details that could contribute to the overall existing puzzle and make the overall picture more rigorous or, in contrast, more favourable.

Most of the events this week will happen in the second half. So, we may expect elevated volatility from Wednesday onwards when the Purchasing Managers’ Index (PMI) and the European inflation data will be released. Some members of the Federal Reserve (Fed), the European Central Bank (ECB), the Bank of England, and many others will give speeches this week.

Business activity is expected to improve in china and some European countries. The U.S. is expected to post rather neutral PMI figures. If these readings  significantly beat forecasts it will put additional pressure on inflation, and may push stock indexes further down.

Inflation in Eurozone is expected to decline to 8.2% in February vs 8.6% for the previous month. The Personal Consumption Expenditure Index (PCE) in the United States was released at 5.4%, beating the previous month’s 5.0%. This may prompt the Fed to act more aggressively compared to the ECB. This divergence in monetary expectations may eventually lead to a stronger Dollar and put additional pressure on risky assets. Officials from central banks are expected to reiterate their monetary tightening stance amid increasing inflation threats. This continued hiking of interest rates  will also put pressure on risky assets.

Technically, the S&P 500 index has changed its upside formation to the downside with the target at 3650-3750 points. This week, a downside perspective is more likely for the index. The index is now very close to the resistance at 4010-4030 points, and may bounce lower towards the support level at 3920-3940 points. The index is unlikely to go further down to 3820-3840 points this week.

The oil market is seen to face the moment of truth, as Brent crude prices are consolidation in the middle of the wide trading range of $79-89 per barrel. This time the price is ready to breakthrough and recession logic suggests that prices are likely to go down.

Gold prices are moving inside the mid-term, upside formation with targets at $2000-2100 per troy ounce by the middle of 2023. Prices are testing the support level at $1790-1810 per ounce. This is very alarming for gold. If prices pass this support level and continue down, then the scenario of a possible change of trend to the downside may become a reality. In this case prices may rewrite last year’s lows of $1600-1650 per ounce.

The money market has finally followed upside signals for the American currency. The Dollar may continue strengthening this week. However, investors should carefully monitor the Non-Farm Payrolls data that will be released on March 10. If the data misses the consensus it may lead to a rapid decline of the Dollar across all currency pairs. Considering the high volatility in the market, it is better to place orders that are attached to longer perspectives. Short trades for EURUSD opened at 1.06700-1.07200 with a downside target at 5000 points below the opening level and the same 5000 points for a stop-loss order should be considered very attractive. The decline of the EURUSD to 1.05000-1.05500 could be used to close half of the trade, and the other half should be continued until the targets at 1.03000-1.03500 are met.