The beginning of the week is too aggressive for the usually calm Monday. The high-tech Nasdaq 100 index lost 2.16% in a single day that was too much considering the Hang Seng index decline by 2.5% early in the morning. Neither could it be explained by rising fuel prices and coming from it inflation pressure.
OPEC+ decided on Monday to follow the plan of lifting production quotas by 400,000 barrels per day that was announced in July 2021 despite great pressure that was coming mainly from the U.S. Administration. Investors now reconsidered their decisions towards higher inflation and higher interest rates lowering estimates for overvalued Big Tech companies’ stocks.
Crude prices jumped to $83.37 per barrel of Brent benchmark on Tuesday, a record high since October 2018. Yields of 10-year U.S. Treasuries rose to 1.496%, while Apple, Facebook and Microsoft stocks lost 2.46%, 4.89% and 2.07% respectively.
Nasdaq dragged the U.S broad stock market down as S&P 500 index fell below the important support level of 4330 points. But, the next support at 4280 points survived. This is the point where recovery began.
The sentiment in the market continue to be alarming one amid rising crude prices as Brent crude is looking for higher price levels at $84 and $86.70 per barrel. But, the time remaining to perform such upside spike is quite limited.
In case of rising crude prices, U.S. 10-year Treasuries’ yields may return to 1.45% enabling stock markets to recover their losses by the end of the week. So, the S&P 500 index may target 4330 points with a possible rise to 4360-4370 points. In the negative scenario with Brent crude prices below $82.50 per barrel the S&P 500 broad market index may drop to 4280 points and even further to 4200 and 4100 points.
Gold market is suffering from rising fuel prices with the price per ounce balancing at $1750. Any spike in U.S. Treasuries’ yields would signal gold prices to plunge below $1700 per ounce. But if crude prices would stop their rally gold prices may try to recover to $1770-1780 per ounce. But, further growth is questionable.
The U.S. Dollar is trading mixed ahead of the Non-Farm Payrolls report that is going to be released this Friday. Until then we may not have a clear direction movement of the Greenback. The EURUSD is targeting 1.16700-1.17000. If the pair would go above this level, it may reach 1.17800-1.18400, where sell positions with a possible 400-500 points gains would be interesting to consider.
The GBPUSD is already above 1.35800 with a strong possibility to hit 1.36600 level, where sell positions with possible gains of 400-500 points are worth considering.