The long
expected Federal Reserve (Fed) meeting this week brought some positive tunes to
markets as interest rates were lifted only by a quarter of percentage point. As
justification for this decision, the Fed referred to geopolitical factors as
Russia continues to scrape Ukrainian cities. The S&P 500 broad market index
rose to 4400 points.
Fed’s
tactics are now clear as U.S. monetary policymakers, except for St. Louis
Federal Reserve President James Bullard that voted to raise interest rates by
0.5 percentage point, decided to ignore blistering inflation and turned to a
“wait and see” mode. “As we emphasize in our policy statement, with appropriate
firming in the stance of monetary policy, we expect inflation to return to 2%,
while the labor market remains strong,” the front man of the Fed Jerome Powell
said.
With his
words in mind investors may believe that the Fed has once again changed its
position as it now supports markets, but not the economy. So, inflation is
ready to spiral. Such a decision may seem to be more concentrated on the short
term rather than the long-term perspective. But for the moment the Fed
conciliated investors and prevented a further market plunge.
The technical picture
for the S&P 500 index changed to the upside with the targets at 4600-4650
points. But it could be too risky to join this rally even with a clear upside
signal that emerged at 4370 points. It would be wise to omit this opportunity
considering extreme uncertainty in the markets and geopolitical risks.
U.S. President Joe
Biden and his Chinese counterpart Xi Jinping will have a direct talk on Friday.
They would certainly discuss Ukraine. The Chinese position on the matter is not
yet clear, so “wait and see” tactics could be the best option.
Brent crude prices
were siting close to $100 per barrel this week amid “progress” in Russian-Ukrainian
negotiations and COVID-19 outbreaks in China. However, crude prices were
heading up at the end of the week with a
possible upside scenario with the targets at $160-180 per barrel. Such a scenario
is too risky, so it is better to avoid the rally before a clear upside signal
emerges.
Gold prices are
hovering around the strong support level at $1920-1930 per troy ounce. In case
of a downside prices may fell to $1840 per ounce with a possible further plunge
to $1750-1760 per ounce by the middle of April. This scenario would be
eliminated in case of rising tensions over Taiwan. U.S.-China talks would be
interesting in this regard too.
EURUSD changed its
pattern to the upside with the target at 1.13000-1.14000. However, some
technical indicators point to a possible downside below 1.08000. So, closing
orders at 1.10450 or holding them would not be a mistake.
GBPUSD has also
changed its pattern to the upside with a target at 1.34000-1.35000. But the
pair is at risk of a downside too. So, any opening of positions in such a contradictory
environment could be too risky.