The week
ends in uncertainty. Macroeconomic data brought positive signs, but no rally of
the S&P 500 broad market barometer was detected, as it added moderate 0.3%
to 4574 points. Brent crude prices rose by a modest 0.6% and dropped to the
vicinity of the $80.00 per barrel after Organization of
Petroleum Exporting Countries and its allies, known as OPEC+, agreed for production
cuts of 2.2 million bpd in Q1 2024.
PCE Price Index, a
Federal Reserve’s (Fed) favourite gauge of inflation, surprised investors with
0.0% MoM in October compared to the expected 0.1%. But, it seem that investors
were not happy at all. U.S. 10-year Treasuries’ yields rose to 4.33% from 4.26%
despite falling for the three consecutive days before the publication. Bets for
early Fed interest rates cut in March dropped to 46.3% from 48.6%. Investors
might be scared by OPEC+ recent decision of production cuts in Q1 2024 that may
push inflationary risks up. The strong U.S. Q3 GDP at 5.2% vs 4.9% expected
could also worry them. On the other hand, Investors could be selling the fact,
and PCE numbers could came in as such.
Another positive
factor affected investors’ minds. One of the Fed’s Board of Governors members, Christopher
Waller, unexpectedly said that the Fed might slash its Fund rates within
coming months of spring if inflation keeps declining steadily. This
statement pushed bets for Fed’s benchmark interest rates cut in March to 48.6%
from 21%. He was the first from Fed officials to say this. However, investors
want Fed’s Chair Jerome Powell to confirm it. This could flag a start of the
Christmas rally in the stock market.
Technically,
the S&P 500 index has almost passed a potential reversal period and would
enter a safer territory next week. The resistance will move to 4650 from the
current 4550 points. It is of paramount importance for the S&P 500 index to
finish Frida and Monday without diving below 4350-4370 pints support.
Otherwise, the Christmas rally could be spoiled, and may turn into correction.
OPEC+ made
its move. The production is cut by additional 1 million bpd. This may result in
a 30% rise of crude prices in coming months. Meanwhile, prices are stagnating below
the resistance at $83.00-85.00 per barrel of Brent crude. The nearest support
is at $74.00-76.00 per barrel. This is where prices might go if they fail to
recover above the resistance.
Gold prices
are moving inside the mid-term upside formation with targets at $2000-2100 per
troy ounce that have already been met. Prices broke through the resistance at
$1990-2010 per ounce, but they have not retested it. So, there are equal
chances for prices to continue up towards $2100 per ounce and for a roll back
to $2010 per ounce.
The
Greenback is hovering inside its primary correction targets at 1.08500-1.09500
against the Euro. Any further correction is largely associated with a Christmas
stock rally. In this scenario, the EURUSD may rise towards 1.12000-1.13000.
Alternatively, the Greenback could resume is strengthening towards the parity
with the single currency.