June
Non-Farm Payrolls published last Friday brought unexpected positive data to the
surface, raising doubts about the possibility of a recession that is widely
expected by the end of 2022. According to the U.S. Bureau of Labour the
unemployment level in June remained at 3.6%, while 372,000 new jobs were
created compared to 384,000 in May.
However,
such positive developments are not a reason for celebration, as strong labour
market may force the Federal Reserve (Fed) to hike its interest rates above the
widely expected 75 bp, or even by 100 bp during its meeting in late July. This move
may be justified if prices in the United States continue to rise. For June the Consumer
Price Index is expected to go up to 8.8% vs 8.6% a month before. If prices
continue to surge, democrats could be blamed for not being able to take control
of inflation, making a democratic majority in congress difficult task to achieve during the upcoming autumn elections this
year. So, any further price spikes would likely be neutralised by the Fed by
raising interest rates as much as needed to tame inflation.
This week
investors will be looking at the Q2 corporate season reports that traditionally
start with the banking sector. Investors are expecting banks to present
disappointing figures considering a slowdown in the U.S. economy. But the
actual reaction could be a surprise.
The S&P
500 broad market index is moving in a downside formation with a target at
3450-3460 points by the beginning of August. However, the situation may change
if the index returns above 3940 points. If it does so targets would be revised
to the upside formation at 4050-4150 points. The most important factor for the
S&P 500 is for it to hold over the 3670 points landmark on Monday, which is
highly likely considering its current prices at 3880 points.
The oil
market looks promising this week as U.S. President Joe Biden is planning a trip
to Saudi Arabia hoping to push Saudis to pump more oil to replace oil from Russia
in the market. His success seems to be unlikely. The technical picture suggests
a new upside horizon for Brent crude with a primary target at $135-145 per
barrel with extreme peaks to $160-180 per barrel by the middle of September.
Gold prices
continue to decline hitting $1732 per troy ounce, rolling back to the $1735-1740
range. The range of $1720-1740 per ounce is a very strong support and may not
be broken through by the end of July. So, half of the short trades opened at
$1860-1880 could be retained by that time.
EURUSD is
consolidating after achieving primary targets at 1.00500-1.01500. The pair is
hovering around 1.01250 with no clear signals for a further direction. So, it
would be wise to wait for any signals to appear first before considering any
trades.
GBPUSD
continues within the aggressive downside formation with the primary target
reached at 1.19500-1.20500. However, if the Cable closes this Monday above
1.20300, the pair may reverse upside towards 1.21500-1.22000.