Central
bankers are trying to extinguish inflationary fires by hiking interest rates and,
in the process, also shooting down stock markets to put them out of their
misery. Investors are close to panic as they are trying to escape the trap of
collapsing stocks. All this chaos has certainly affected the FX market.
However, for
now the situation only looks like a chaotic one despite increased volatility,
and investors are still betting on central bankers succeeding on preventing
another cyclical crisis. These hopes are reflected in currency rates, commodity
prices, stock indexes, and bond dynamics. All of these have exercised high
volatility but within technical patterns so a chaotic situation seems to have
been avoided so far. True panic will likely crash everything on its path and
all technical patterns and modeling will become useless. Short-term patterns
are idle now, while mid-term technical modeling seem to be reliable. This could
mean that markets have one or two months before real chaos engulfs them.
This idea
could very well coincide with the timing of the next Federal Reserve (Fed)
meeting on July 26-27, followed by Q2 2022 U.S. GDP first estimate publication
on July 28. If GDP figures slip into negative territory again this would mean
an official recession started after Q1 2022, when GDP recorded a decline of
1.5%.
Crude
prices are performing quite the other way as they are signaling to set positions
to lift off to the extreme $160-180 per barrel of Brent crude by the end of
June. It would be a nightmare to imagine what the response of the Fed and other
monetary policymakers would be to such a surge.
The S&P
500 broad market index remains within the aggressive downside pattern while
already meeting the primary target at 3650-3750 points. Next week there may be an
opportunity for a rebound. If this rebound fails to beat the resistance at 3850
points, the index would likely drop towards the secondary downside targets at
3450-3550 points.
Brent crude
prices bounced off the resistance at $124 per barrel and are now hovering
around $121 per barrel, while getting ready to test the resistance again. The
heart of this story lies in the visit of U.S. President Joe Biden to the de
facto ruler of Saudi Arabia Crown Prince Mohammed bin Salman to convince the
latter to pump more oil. The response of the prince is hard to guess, but Brent
crude prices certainly have a chance to rise towards $135-137 per barrel after
the meeting. Once this level is reached the window for Brent crude rally opportunities
towards $160-180 per barrel will open.
Gold prices
continue to slide and may continue to do so until the end of July. This week
prices dropped to $1805 per troy ounce and rebounded quickly to $1840-1850 per
ounce. This rebound could be attributed to falling yields of the U.S. 10-year
Treasuries in the recent days. The nearest support for gold prices is at
$1730-1750 per ounce, and short positions opened at $1860-1880 are seen to be
justified.
The FX
market is experiencing high volatility this week as Swiss National Bank (SNB) has
suddenly lifted its interest rates from -0.75% to -0.25%. EURUSD has changed its
pattern to the upside after this unexpected move by SNB. The upside target for
the Euro is at 1.07000-1.08000 and it seems to be an interesting buy
opportunity to consider. But these operations from 1.04500-1.05000 with targets
at 1.07000 are seen rather risky and should be performed with extra caution.
GBPUSD has
also changed it pattern to the upside, meeting targets at 1.23500-1.24500. Such
a rapid rise may wake up doubts about the stability of this rally. So, it is
better to monitor both pairs for more reliable signals.