The U.S.
Stock market performed a sharp rebound of 5.2% last week, primarily on Friday
when stocks were up by 3.2%. But this seems to be no reason for optimism as
investors witnessed recession possibilities rise after the Federal Reserve’s
(Fed) Chief Jerome Powell admitted that there is a chance for this to become a
reality. Investors should be also aware of the fact that such a sharp rebound
usually happens during bearish markets. And this where the market has been
positions since June 13.
So, this
rebound is seen to not be sustainable. Nevertheless, many bullish enthusiasts from
Wall Street have started to convince
investors that the market could gain 10-20% by the end of this year. Such
affirmations are seen to be way too optimistic as inflation in the United
States, that is plummeting the market, remain close to 40-year peaks. Economic
activity in the United States is contracting rapidly and PMI readings confirm
that. This week the Core Personal Consumption Expenditures (PCE) index is to be
released. It is expected to remain at 5.10% year-on-year for the Q1 2022. This
index is one of the primary indicators that the Fed i monitors when making
interest rates decisions.
So, what
should we do? Unfortunately, there is nothing we can do, but wait for the
official confirmation of the start of the recession by the Fed and other
central banks. However, such a confession is likely to be delivered only after statistical
confirmation is received. This is likely to happen late July when official
figures for Q2 2022 GDP in the United States will be released.
So, Chair
Powell and his colleagues from the European Central Bank and the Bank of
England may play around with the market for some time, but they are unlikely to
take on soaring inflation. They just need more time to tighten monetary policies
as much as possible so they can have solid ground to base other quantitative
easing in autumn to cushion the recession blow.
The S&P
500 broad market index changed the pattern to the upside with the target at
4000-4100 points by the end of July. Those who want to attend this final
rebound may join it with a minor trading volume. Conservative investors are
advised to wait for a signal to initiate short positions in the second half of
July.
The oil
market is the most interesting story now. Brent crude prices are set for the
rally towards $160-180 per barrel within the next two weeks. So a long position
for crude at $112.70 per barrel looks extremely attractive. G7 countries are
innovating new ways to lower crude prices by limiting prices for Russian oil.
But this could have quite the opposite effect. The actions of the Organisation
of the Petroleum Exploring Counties and allies (OPEC+) including Russia is very
interesting in this regard. OPEC+ is set to hold a meeting this week.
Gold prices
continued to move to the downside and dived to $1820-1825 per troy ounce. If
prices continue to drop any further, they may accelerate towards the $1730-1750
target area. Short trades opened at $1860-1880 remain intact, while it may be worth
considering new trades if the price recovers to this range.
EURUSD
remained within the upside pattern with a primary target at 1.07000-1.08000.
This week started with the resistance
level at 1.05300-1.05500 being passed as the pair reached above 1.05800. There
are still no good entry points now. So, it is better to wait for the downside
to 1.04500 and below to open long trades.
GBPUSD
remain in a downside pattern with a support level at 1.22200-1.22400. The
pattern also has a strong resistance level at 1.23200. So, it is better to wait
for the pair to change the pattern for the upside to consider long positions.