The S&P 500 broad market index has met its primary upside target above 4150 points, while putting on the brakes just before the 200-day moving average at 4180 points was met. Brent crude prices dropped below $100 per barrel, while gold prices are hoovering close to the resistance at $1800 per troy ounce.
Geopolitical tensions surrounding U.S. House Speaker Nancy Pelosi’s visit to Taiwan didn’t spoil the party, as China introduced new sanctions on Taiwan and conducts wide scale military drills around the island. Investors feared the visit from the U.S. top official may prompt a military response from mainland China, so gold was the only asset to benefit from this flareup.
Weak July PMI readings released for China, the United States, the Eurozone, and the United Kingdom this week supported the idea of a possible slowdown of the Federal Reserve’s (Fed) monetary tightening strategy in September. A possible weak July Non-Farm Payrolls report may contribute to the idea. Indeed, weak PMI readings in the U.S. signal a possible slowdown of the labour market. Our statistical modeling suggests the Non-Farm Payrolls may show that 200,000-250,000 new jobs were created by the American economy, meaning an unemployment level of 3.6-3.7% may be expected for July. Indeed, weak labour market data could generate elevated volatility as the S&P 500 index may try to breakthrough above the 200-day moving average towards the 4250-point next week.
The oil market situation has become even more complicated after Brent crude prices failed to break through the resistance at $107-108 per barrel despite a low production increase of 100,000 barrels per day by the Organisation of the Petroleum Exporting Countries and its allies (OPEC+) in September. All in all, Brent crude prices slipped to $97 per barrel while trying to find further clear directional signals. The upside scenario for Brent crude with primary targets at $135-145 per barrel and extreme targets at $160-170 per barrel is still intact. But no upside drivers to such an upside area can be seen at the moment.
Gold prices are enjoying the upside of a tailwind and continue to climb towards the resistance at $1800-1820 per troy ounce. Gold prices may continue to rise by the beginning of September but are likely to plummet in November towards $1350-1450 per ounce. So, it would be wise to wait for the prices to reach the resistance level at $1800, and consider opening small, short positions in September.
EURUSD continues to move inside an aggressive upside formation with targets at 1.03500-1.04500 by the middle of next week. The are no reliable entry points for a deal so far and it is very risky to open long positions at this point. So, it would be wise to wait for next week as the Non-Farm payrolls report to be released today may create some opportunities for a deal.
GBPUSD has met its targets at 1.21500-1.22500 inside an aggressive upside formation. There are more extreme secondary targets at 1.23500-1.24500, but these buy opportunities are very risky. So, sticking to wait and see tactics before the beginning of the next week could be the best option.