Strong Economic Data Drags Stocks to New Records

Another promising week has started after impressive NonFarm Payrolls report last Friday. The economy of the United States has created 916,000 jobs outside agricultural sector in March, a record since August 2020. The unemployment fell from 6.2% in February to 6% in March. A strong Services PMI in March at 60.4 points just added more inspiration to investors as it is a seven-year record since 2014.

An ultra-positive macroeconomic data points to a faster economic recovery in 2021, and suggests more profits to American companies. So, investors are buying everything they see from hi-tech sector to a cyclical stocks. The S&P 500 broad market index on Monday gained 1.5%, Dow Jones – 1.2%, while Nasdaq 100 jumped by more than 2%.

Crude oil performs rather strange dynamics despite strong U.S. recovery. Brent crude plunged by more than 4%. Perhaps, OPEC+ was ahead of the market as it added some 2.15 million barrels per day of crude to the market by the month of July.

The U.S. Ten-year Treasuries yields are consolidating close to 1.70%, and are representing a risk for the stock market if it resumes climbing to 14-month highs.

On Tuesday investors will pay attention to March PMI readings in China, and to the interest rate decision of the Reserve Bank of Australia. This week traders should also pay attention to the FOMC minutes and Fed’s Chair Jerome Powell, who is expected to share it view on global economic developments at the IMF on-line conference.

The most intriguing question, however, is if The S&P 500 index is going above this week’s resistance level at 4110 points. It seems unlikely this level would be breached. So, sell positions at this level with a target of 4000 and 3900 points would be interesting to open. Although, of the index continue its robust rally in the coming days, a better decision would be to stay out of the market.

Oil market has performed a completed reversal pattern with targets far below current price levels. However, Brent crude has to dive below $60,00 a barrel to streamline to these targets. If this level would fail to sustain then the rally in the stock market would be also questionable.

Gold prices are within the range of $1700-$1750 per troy ounce as the U.S. bond market is taking a break. However, high bond yields are curbing gold prices from any upside movements until 10-year Treasuries yield fall below 1.7% or in case of rising geopolitical risks.

The U.S. Dollar lost some 0.5% on Monday, but it is seen rather as a short correction. Other currencies are following a strong-Dollar paradigm. The EURUSD still has a support at 1.15300, and the closest resistance at 1.19400 where sell positions would be interesting to set.

The GBPUSD almost returned to its weekly resistance level at 1.39200, but slipped to 1.38900 on Monday after hours trading. The pair is likely to decline to 1.35100 if it fails to break through the above mentioned resistance.

The USDJPY performs its downside reversal pattern after hitting 110.50 resistance level last week. The nearest support level is located at 106.50, and we should expect the its development in this direction this week.