The situation in the financial markets is seen to be deteriorating by the end of the week as the fog of optimism that blinded investors is fading. U.S. stock indexes are going down with the S&P 500 broad market index losing 1.3% to reach 4078 points. The U.S. 10-year Treasuries yields are reasonably high at 3.66%, while the Dollar lags behind with only a rise of 0.6% this week.
Investors are still fascinated by the remote possibility of a stock rally and might consider the current market roll back as temporary amid the hawkish rhetoric of Federal Reserve (Fed) officials that followed the ultra-strong Non-Farm Payrolls report for January.
Investors hope that weaker macroeconomic data for the United States will follow, and inflation data next week would restore hopes for a swift curtailing of the Fed’s interest rate hike cycle. There is minor room for such hopes to become reality. If the stock market fails to perform a positive upside next week and starts moving down, it may indicate a large decline in the market.
Technically, the S&P 500 index continues within the upside formation with the primary target at 4100-4200 points. The index reached the resistance at 4180-4200 points and went into the downside correction to the support the level at 4080-4100 points. The index is expected to bounce towards the nearest resistance at 4180-4200 points, or continue to drop to 4000 points.
Brent crude prices have failed to go below the support at $77-79 per barrel and are trying to recover to $87-89 per barrel. The activity is rising along with an uncertainty. In this situation it is better to wait before prices break out of the wide range of $79-89 per barrel in either direction. 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 have fallen below $1880-1900 per ounce, increasing chances of a further downfall to the support level at $1790-1810 per ounce. Odd price growth over the last weeks may point to a possible change of trend to the downside during elevated volatility to rewrite last year’s lows.
The money market is still ignoring any upside signals for the American currency. After the release of Non-Farm Payrolls data, the Dollar has gained momentum and may continue to strengthen further. 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.