As the Federal Reserve (Fed) will hold its meeting next week, meaning that markets cannot expect watchdog officials to deliver any comments before it. Meanwhile, a true burst of data and market related information is expected to hit the market this week. It may rock the market’s fragile equilibrium in either direction towards another rally of risky assets or to a major sell-off of these assets.
The corporate sector will deliver Big Tech Q1 2023 earnings reports for Google, Meta, and Amazon, accompanied by the reporting of troubled regional banks, like First Republic Bank and First Citizens Bank, that were practically saved by the Fed and U.S. Finance Ministry. Investors are expecting positive surprises from Big Techs, while regional banks will deliver their reports beforehand. . So, some nervousness may emerge at the beginning of the week.
European banks will deliver their quarterly reports too, but they are unlikely to hit the market in any direction since they have mostly avoided banking quake issues in March.
Investors will also focus on the incoming macroeconomic data, including Q1 2023 U.S. The first estimate of the Gross Domestic Product (GDP) will be released on Thursday and March Core Personal Consumption Expenditure (PCE) Price Index will be published on the following day. Consensus suggests U.S. GDP could slow down to 2.0% quarter-on-quarter compared to the 2.6% in the previous quarter. This could be another indication of a nearing recession. Negative corporate reporting may amplify the indication.
Technically, the S&P 500 index has an upside formation with targets at 4150-4250 points that have already been met, but without a clear reversal. The index may continue to move to the next ambitious upside targets at 4500-4600 points. Readings above 4180-4200 points will confirm this move. However, fundamentally it is unlikely to happen.
Brent crude prices rebounded from the resistance of $86 per barrel, lowering chances for an upside move to $94-96 per barrel. The recession scenario may become a leading one if prices continue to fall below $80.70 per barrel, towards $40-60 per barrel of the Brent crude benchmark. But now it is too early to put all bets on the downside scenario as a drop in crude prices may become a simple technical correction if they move above $78.00 per barrel.
Gold prices are moving inside the mid-term upside formation with targets at $2000-2100 per troy ounce that have already been met. However, the tension is mounting as prices may continue to go down to $1900 per ounce if they pass the $1980 threshold. If the support survives, prices may lift to $2080-2100 per ounce. So, it is better to wait until the battle over $1980 ends and prices move above $2000 per ounce.
The U.S. Dollar is expected to be supported by the emerging upside signals in April. 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 are intact. The decline of the EURUSD to 1.05000-1.05500 was used to close half of the trade. The other half should be continued until the targets of 1.03000-1.03500 are met.
Besides, short positions for AUDUSD from 0.66900-0.67400 with the target of 3500 points and the same stop-loss order could be considered interesting. Short positions for GBPUSD from 1.23300-1.23800 with a target of 5000 points and the same 5000 points for a stop-loss order could be considered. Rising risks and market volatility could prompt trade volumes to be reduced.