Weekly Focus: NFP, OPEC+ Meeting, and Fed Testimonies

The S&P 500 broad market index tested lows at 3570 points on Monday. This is the lowest support level the index may drop towards before hitting the extreme targets of 3400-3500 points and heading towards possible market turmoil.

British finance minister Kwasi Kwarteng said this morning that the government will reverse its plan to scrap the highest rate of income tax after a backlash to his proposition of a mini-budget to cut taxes was received. The whole proposal that sent the Pound spiralling down last week has caused chaos in the British political scene and this position is seen to undermine the entire “growth plan” that newly elected Prime Minister Elizabeth Truss came up with as a new leader of the government. So, Kwazi Kwarteng had to step back and canceled the abolition of the 45p tax rate.

The British Pound has completely recovered, while the debt market is just now on the path to recovery. Nevertheless, other similar controversial stories where the finance minister or the Chair of the Central Bank are the only ones blamed for possible catastrophic moves that destabilise markets could come to the surface in the near future.

This week risks of such uncertainties are significantly lower as the Non-Farm Payrolls data will be released this Friday. Thus, investors could be less active in the market throughout this week. Some uncertainties are emerging in the oil market as the Organisation of Petroleum Exporting Countries and its allies, knows as OPEC+, is expected to cut crude production significantly. Crude prices are among major inflation contributors and any significant changes to energy prices could affect the Federal Reserve’s (Fed) monetary policy. The tone of such changes may be heard from Fed officials that are going to testify this week.

The S&P 500 index continues within the aggressive downside formation, trading below the primary target at 3650 points. A possibility of further deterioration towards 3400-3500 points is extremely high. If the index closes this week at 3570 points this downside scenario will be activated. The long-term targets remain at the low levels of 2000-2200 points.

The oil market is considering OPEC+ production cuts as highly likely as Brent crude prices recovered almost to $90 per barrel. Traders expect OPEC+ to cut production by 0.5-1.0 barrels per day. So, we may expect some elevated volatility here. But overall the oil market is balancing on the edge with high chances of a decline amid the upcoming recession. Long-term target prices for Brent crude suggest a drop to $50-65 per barrel by November.

Gold prices are hovering around $1660 per troy ounce as the Greenback slowed down and there are rising geopolitical tensions around Ukraine. Nevertheless, prices are below the important milestone at $1680-1700 per ounce, and may resume falling towards $1350-1450 per ounce by the end of October.

The money market continues to witness high volatility with controversial signals for October. The British Pound signals a possible huge recovery from the current 1.12000 to 1.17000 by the end of this month. This being said, the EURUSD is likely to remain under pressure. Overall, short-term long trades for the Pound could be justified in a month or two. Volatility in EURUSD may decrease by the end of this week. This may bring some short-term trading opportunities that need to be considered.