This super
week started on a negative note as the S&P 500 broad market index went down
by 0.8% to 4036 points. This looks quite unusual but some market participant
may be aware of the unexpected decisions and events that are seen to be
happening behind the scenes, away from the crowd’s eye. This week is one of the
tensest in 2023 so far, and certainly most important, in recent months. So,
investors are seen to form rather cautious outlooks for further perspectives.
Major
events will start on Wednesday when the Federal Reserve (Fed) will announce its
long awaited interest rate decision. Investors expect the Fed to raise its
interest rates by 25 basis points, but nobody has a concrete idea certain about
the rhetoric of the monetary watchdog for its future intensions. So, investors
have increased their short positions in short-term Treasuries to record highs
that may signal they are afraid of the Fed’s strong hawkish rhetoric.
The corporate
earning reporting season is close to its zenith as tech giants Amazon.com
(AMZN), Apple (AAPL), Alphabet (GOOG), and Meta Platforms (META) are about to
present their Q4 2022 financial results. Many companies have missed analysts’
expectations this season, so we may expect that some of the Big Techs to disappoint
investors.
The
European Central Bank (ECB) and the Bank of England (BoE) will make their
interest rate decisions on Thursday. The ECB is expected to raise its rates by
50 basis points, but the rhetoric may signal a slowdown of further interest
rate hikes. In this situation investors may be faced with a more hawkish Fed. This
may dramatically affect the Euro.
The closing
of the week will be highlighted by the Non-Farm Payrolls report for January. This
data may certainly generate elevated volatility. Technically, the S&P 500
index is within the upside formation with the primary target at 4100-4200
points. But it has now entered the reversal opportunity window which is
expected to remain open until the Fed’s meeting next week. The index went into
a technical correction after reaching the resistance level at 4080-4100 points.
The nearest support is at 3980-4000 points, the next resistance is at 4180-4200
points.
The oil
market is another story. Brent crude prices retreated after a vain assault on
the resistance level at $87-89 per barrel. The meeting of the Organisation of
Petroleum Exporting Countries and its allies (OPEC+) on February 1 may push
prices in either direction. Technically, Brent prices are likely to be headed
on their way down, but OPEC+ has surprised markets many times before so it is
better to be prepared for any developments. Besides, the military conflict over
Iran may bring with it some surprises in the case of further escalation.
Gold prices
are moving inside the mid-term, upside formation with targets at $2000-2100 per
troy ounce by the middle of 2023. Prices have largely exceeded the upper margin
of $1880-1900 per ounce, hovering around $1948 per ounce. Odd price growth over
the last week may suggest a further price rally to $1970-1990 per ounce without
any stopovers, but may also signal to a possible swift change of a trend to the
downside during elevated volatility to rewrite last year’s lows. The realization
of either scenario may happen this week.
The money
market is ready for the strengthening of the U.S. Dollar even though it has
ignored any upside signals for the American currency. Considering the high
volatility in the market, it is better to place orders that are 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 very attractive.