Weekly Focus: Lagarde and Powell Duo to Rock Down Markets

The American Stock market continues to move deeper into the negative zone. Last week was the most devastating since March 2020, when the COVID-19 pandemic hit the global economy. The S&P 500 broad market index lost 6% last week, posting 11 negative weeks out of the last 12 weeks.

This short trading week is filled with statements by two major Central Bankers  that may significantly affect markets. The President of the European Central Bank Christine Lagarde is set to testify today in front of the EU Parliament. Any details to do with interest rate changes and any estimations and forecasts to do with the leveling up of the EU nations’ debt yields would be of a particular interest. Mrs. Lagarde speech may generate elevated volatility in the markets, especially during the Juneteenth holiday when U.S. exchanges are closed.

The Federal Reserve (Fed) Chairman Jerome Powell is going to testify to U.S. Congress on Wednesday and Thursday when he will deliver his semi-annual update on monetary policy. His speech is unlikely to generate additional volatility since the Fed has already announced its hawkish plans several times, so Powell is likely to repeat the same statements already made. Nevertheless, his speech may have a moderate negative effect on the markets.

Macro statistics, like PMI indications, are likely to have a minor effect on markets. Overall, we may expect a slight downside for stocks this week as the S&P 500 index is strongly supported at current levels. The index is moving within an aggressive downside pattern with delivered primary targets at 3650-3750 points. It may slightly bounce  at the beginning of the week to 3750-3850 points, but this bounce could be unstable. If the bounce stalls below 3850 points before Thursday, the index may drop towards extreme targets at 3450-3550 points.

Brent crude prices bounced off the $124 per barrel resistance level to $112-115 level that was broken through four weeks ago. It could be a short squeeze when major market players are trying to push away traders that had long positions open as they were betting on oil prices climbing further. Nevertheless, there is at least two weeks ahead for Brent crude prices to jump towards $160-180 per barrel.

Gold prices continue to move down and may move in the downtrend until the end of July. Prices are hovering around $1840 per troy ounce. The first downside target is located at $1730-1750 per ounce. Any short trades opened at $1860-1880 per ounce are intact. New short positions could be opened when the prices recover to the latter area.

The FX market went into consolidation after elevate volatility last week. EURUSD remain within the upside pattern with the target at 1.07000-1.08000, which is looking very attractive for those who opened long positions at 1.04500-1.05000 last Friday. However, it would be better to move stop loss orders to 1.04750 to protect your position. It is too early for new trades to be opened.

GBPUSD looks unstable at the current levels. Thus, opening new trades are better to be avoided now. Short positions would be interesting to open from 1.23300-1.23600 while opening long position at 1.19500-1.20000 is currently at attractive area. It is worth remembering that even these indicated levels to open trades have a very low reliability rate.