The Federal
Reserve (Fed) Chairman Jerome Powell has finally admitted a possible recession
in the United States after a sharp hawkish interest rate rise. Such a
confession was extremely hard for Mr. Powell, but it seems he had no other
choice.
June PMI
readings that were published just before his testimony before U.S. Congress on
Thursday, left investors and analysts wide-eyed as the Service PMI dropped to 51.6 from 53.4 a
month before, a very sharp decline. The Production PMI plunged to 52.4 points
from 57.0 points in May. If Mr. Powell decided to ignore this data, he would have
looked rather stupid in front of the senators that could have come to the
conclusion that he clearly has a mental disorder.
Secondly,
ignoring economic realities in order to suppress inflation would cause the
stock market to spiral down without any chance of a rebound this summer. By
recognising the possibility of a recession Fed’s front man presented his
adequate vision of the economic developments and created hopes for a possible
slowdown of monetary tightening by the Fed in the case of further economic
deterioration in the United States.
Such verbal
gymnastics helped the S&P 500 broad market index to recover over 3800
points and seek further upside opportunities. If the index continues to score
any further, it may signal the upside pattern on Monday. This would be a very
aggressive long position but it could be justified before the next Fed meeting
on July 26-27.
Crude
prices are trying to stage some drama as they are showing some inability to
reach new highs. And this is likely a bullish trap as there is enough time for
Brent crude to outshoot recent highs to rally towards the ultimate targets at
$160-180 per barrel. The drop below $110 per barrel may be confusing, but there
are no reasons to change the aggressive upside scenario.
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
targets. Short trades opened at $1860-1880 remain intact, while it may 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.
But the resistance level at 1.05300-1.05500 may stop this upside. So, there no
good entry points next week.
GBPUSD has
entered 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 until the pair bounces to the resistance level
to consider short positions. In the other case there are no good entry points
so far.