The S&P
500 broad market index lost around 1.0% to reach 4360 points during this week.
Brent crude prices were down by 4.5% to $72.96, while the U.S. Dollar index
gained 0.8%.
Risky
assets are seen to be attacked by “monetary hawks” from leading central banks.
Firstly, the Federal Reserve’s (Fed) chair, Jerome Powell, confirmed its
hawkish stance of further rising interest rates by 0.25 percentage points two
more times this year. The Bank of England (BoE) then delivered an unexpectedly high-rate
increase of a 0.50 percentage point after consumer inflation in May remained at
8.7% YoY. Norges Bank, the central bank of Norway, also unexpectedly raised its
interest rates by 0.50 percentage points. U.S. Minister of finance, Janet
Yellen, said that "we probably need to see some slowdown in spending in
order to get inflation" under control.
These
hawkish efforts were supported by the declining business activity indications
as the Purchasing Managers’ Indexes (PMI) continue to deteriorate in leading
economies. The Eurozone’s Manufacturing PMI fell to 43.6 points in June
compared to 44.8 in May, the same indicator dropped to 46.2 points from 41.1
points in the United Kingdom. If this trend also continues in the United States
then investors may wonder what exact interest rates hikes Mr. Powell is talking
about amid a stalling economy?
It seems
that major central banks are chasing each other to set the highest interest
rates to have more room to decrease them later during a severe turmoil that is
very closely approaching. The European Central Bank’s (ECB) President,
Christine Lagarde, may also add some hawkish notes next week. If she sets a
very hawkish tone then risky assets may be in danger.
Technically,
the S&P 500 index continues to have an upside formation with targets at
4250-4350 points, that have already been met. The market has failed to move
alongside an extreme upside scenario with targets at 4550-4650 points during
this week, and is starting to chart a correction pattern. The index is sitting
on the support at 4340-4360 points. The next support level is at 4240-4260
points.
Crude
prices have dropped towards the support at $67-69 per barrel of the Brent crude
benchmark. Once this level is broken, recession scenario chances will become
very high. Its targets are at $40-60 per barrel of Brent crude. Traders should
not forget the Organisation of Petroleum Exporting Countries and its allies
(OPEC+) could interfere to support crude prices. So, it may not be the best
moment to trade crude.
Gold prices
are moving inside the mid-term upside formation with targets at $2000-2100 per
troy ounce that have already been met. But the situation has changed
dramatically as the important support level of $1980-2000 per ounce was
smashed. Short positions were opened after prices tested the $1970-1980 former
support level with targets at $1890-1910 per ounce. The first half of this
trade was closed at $1910 per ounce, while the second half was left open with
the stop-loss order moved to $1980 to avoid any losses, and amid expectation of
some extra profit.
The
Greenback recovered some losses during the week which allowed it to get a decent
profit on EUR/USD short trades that were opened at 1.09500-1.10000 with a
target at 1.08000-1.08500. The American currency has an advantage over its
peers, but it is too risky to go long on the Greenback at the moment. It would
be better to wait for another upside move from the U.S. Dollar to seek out sell
opportunities for the Greenback.