The week
ends on a negative note. Central banks continue to fight inflation, pretending
to ignore banking sector troubles. The European Central Bank (ECB) increased
its interest rates by 0.50 percentage points last week, while the Federal
Reserve (Fed) added another 0.25 p.p. this week. Stock indexes are sliding down
to close the week on a negative territory.
The reason
for this week’s drop is not primarily the Fed, but the Treasury Secretary Janet
Yellen, who rolled out an expansion of deposit insurance above $250,000. That
was a sobering cold shower for investors as rumours that all deposits in the
U.S. banking system are SAFU stopped the sell-offs on Monday and pushed stock
markets up. The next day Yellen almost redeemed her swift unwise statement, but
the stock market had already lost 1.6% by this time, erasing most of the weekly
gains.
Yellen said
the U.S. Administration is prepared to take more actions to keep bank deposits
safe. This did not seem justified, and this sentiment has almost been ignored
in the market as investors prepare for the worse to come.
Technically,
the S&P 500 index continues to move within a downside formation with
targets at 3650-3750 points. There are no hurdles to stop the index from
falling to 3840-3860 points. The nearest resistance is at 3950-3960 points. The
rendezvous with the support at 3840-3860 will be most important. If it fails
the possibility of a further drop to the primary target at 3650-3750 points and
below will increase dramatically next week.
Oil prices
retested recently confirmed resistance level of $77-79 per barrel of the Brent
crude benchmark. Recession logic suggests that prices are heading towards
$67-69 per barrel with the primary target at $40-60 per barrel. The
Organisation of Petroleum Exporting Countries and its allies will meet at the
beginning of April. So, there seems to be nothing to support prices, except perhaps
for some unexpected tensions in the Middle East.
Gold prices
are moving inside the mid-term, upside formation with targets at $2000-2100 per
troy ounce by the middle of 2023. Prices broke through the resistance level of
$1890-1900 per ounce amid a shocking quake in the U.S. banking system and the
widening fears of a possible banking crisis. They have reached the target zone.
However, prices are likely to tumble before they can resume climbing towards
extreme targets at $2400-2500 per ounce. It is better to wait and see how the
situation will evolve.
The U.S.
Dollar has dropped substantially, but this seems to be rather temporary. The
Dollar may renew its highs before going further towards the other direction.
Considering high volatility in the market, it is better to place orders
attached to longer perspectives. Short trades for EURUSD opened at
1.06700-1.07200 with a downside target at 5000 points below the opening level
and the same 5000 points for a stop-loss order should be considered attractive.
The decline of the EURUSD to 1.05000-1.05500 could be used to close half of the
trade, and the other half should be continued until the targets of
1.03000-1.03500 are met.