The market continues to suffer badly. U.S. stock indexes posted new lows not seen since June 2022 and Brent crude prices dived below $85 per barrel. Currencies are experiencing extreme volatility after the British Pound plunged by more than 5%, almost to the parity with the U.S. Dollar.
This extreme volatility signals the move of large capital to other investment areas. Due to these circumstances oil prices are likely to be the first to suffer followed by the stock market, as a recession is seemingly knocking on the door.
The Greenback is posting new records and is already at its multi-decade highs. Thus, investments in the U.S. Dollar may not be the final destination for capital to survive the current crisis. The final destination could be gold, silver, or other precious metals, while some reserve currencies like the Euro, the Pound, or the Yen which have reached phenomenally attractive levels. The Cable may bring 20-25% profit if the recovery from current levels is achieved.
In the short run, the Greenback may continue to rise amid huge short-term geopolitical risks in Europe. This week Russia may claim occupied territories as its lands and deliver an ultimatum to Ukraine for its army to leave these areas, to accept a cease-fire, and recognise them as Russian territories. Other reports like statements from the Federal Reserve (Fed) and the European Central Bank, and the U.S. final Q2 2022 GDP estimate, will be seen as less importance compared to the developments in the Russia-Ukraine war. Some assets may certainly be affected, but the raging war is likely to harshly dominate investors’ behavior.
The S&P 500 broad market index continues to follow an aggressive downside formation trading below the support at 3700-3750 points. Further deterioration to the extreme targets at 3400-3500 is very high. Short trades at the average price at 4050 were opened with final target prices at 2000-2200 points.
The oil market is on the verge of a deep crash after it broke through $75-85 per barrel of Brent crude. Long-term targets are located at $50-65 per barrel of Brent crude.
Gold prices continue to be under pressure after falling below the important support levels at $1680-1800 per troy ounce. So, prices are likely to move according to the primary scenario towards $1350-1450 per ounce. Short trades for 25% of the targeted volume were opened at $1730, and the next 25% of trades was activated after a retest of $1680-1700 area. It is too risky to open more trades given the high geopolitical tensions that may reverse gold prices at any moment.
Currencies are suffering huge turbulence with sharp short-term movements. Thus, it would be unwise to consider opening short-term trades, while it would be wise to wait until the end of this month to open longer positions when mid-term and long-term trends are thought to pick up.
EURUSD has almost met its extreme targets at 0.94000-0.95000. Large capital investors accumulated long positions, but the pair may dive somewhat further.
GBPUSD suffered badly after the new British government decided to act in a Turkish-style economic policy by lowering taxes and rising social spending amid a weak trade balance. The Bank of England has protested the move as ignoring macroeconomic laws might lead the Pound to crash, therefore triggering interest rates to raise sharply and eliminating any popularity that the new government has gained.