With Good
Friday being at the end of this week, it is too short to host so many events
which include inflation data from the United States, a statement from the
Federal Reserve (Fed) Governor Lael Brainard, bank earnings reports for the Q1
2022, the European Central Bank’s (ECB) meeting, an expected hike of interest
rates in New Zealand and Canada, and some other important macroeconomic data in
the United Kingdom and the Eurozone. All this is going to happen within these
three days before the celebration on Friday.
There will
be too much data to compile an explicit logical understanding of the economic
playing field. Thus, we may see excessive volatility in the markets without any
particular direction. If this week will perform a similar paradigm on all
markets is hard to say as the technical picture for stocks, commodities and
currency markets differs. The S&P 500 broad market index has changed its
pattern to the downside with a first target at 4100-4200 points by the
beginning of May. However, a breakdown to 4400 points on Monday saw the
benchmark being just a notch away from an aggressive downside pattern that may
direct the index much deeper than 4100-4200 points, and this could happen very
fast. To activate this scenario the S&P 500 index has to close on Wednesday
below 4390 points. There are plenty of market drivers to push the index in
either direction. The Consumer Price Index (CPI) for March may post a new
40-year record high. Fed Governor Lael Brainard must send a clear message to
the market to tame inflation in the “fast and harsh” manner.
Bank’s
corporate earnings reports may support the stock market on Wednesday, as Wall
Street is full of optimism. However, this could not be enough as banks may
suffer from rising labour costs. Expectations of interest rates hikes in New
Zealand and Canada by 25 basis points and 50 basis points respectively may
impact the prices of stocks in a negative manner. This could be very true amid
expectations of further monetary tightening by the Fed within the next three
weeks.
The ECB may
curb a negative effect on stocks as it may continue with its loose monetary
policy, however this would certainly not be enough to
resume an upside trend for U.S. stocks. In this regard, wait and see tactics may be the best
option by the end of Wednesday. If the S&P 500 index closes Wednesday below
4390 points than traders should be ready for a downside move to the 4100–4200-point
range. If the opposite becomes true, then traders should wait for better sell
options.
Brent crude
prices are hoovering inside a support zone at $95-105 per barrel and may
continue to do so by the middle of May. This scenario will not manifest if
Russian oil is banned by all major European nations.
Gold prices
are struggling to the upside despite unfavorable conditions. Gold prices rose
to $1955 per troy ounce despite the strengthening U.S. Dollar and rising
10-year Treasury yields above 2.7%. However, this may signal a possible
downside correction by the end of April. Short positions, opened at $1950-1960
per ounce with a target at $1840 per ounce are intact.
The
Greenback is preparing for a breakthrough. EURUSD is within an aggressive
downside pattern, preparing to face record inflation data in the U.S. and for
the outcome of ECB statements. The primary scenario suggests the Euro would slide
to the area of 1.07000-1.08000 by the middle of the week. In case it fails to
do so, the EURUSD may rebound to 1.09500-1.09700, where it would be interesting
to consider short positions. Aggressive short trades, opened at 1.10450 could
be maintained considering a possible plunge to the 1.07000 and below.
GBPUSD is
on the downside trajectory to the 1.28000-1.28500 area. Short positions that
were opened at 1.31200-1.31800 could be partially kept until Wednesday as the
pair signals it may continue below a strong support at the 1.30300-1.30400 area.
If the pair slides below 1.29800, the rest of short positons could be left to
seek a target price at the 1.29000-1.29500 area.