This
trading week may seem boring, as the macroeconomic calendar is missing top data
that would affect markets. Although this is the case, there are some important
details that could contribute to the overall existing puzzle and make the
overall picture more rigorous or, in contrast, more favourable.
Most of the
events this week will happen in the second half. So, we may expect elevated
volatility from Wednesday onwards when the Purchasing Managers’ Index (PMI) and
the European inflation data will be released. Some members of the Federal
Reserve (Fed), the European Central Bank (ECB), the Bank of England, and many
others will give speeches this week.
Business
activity is expected to improve in china and some European countries. The U.S.
is expected to post rather neutral PMI figures. If these readings significantly beat forecasts it will put
additional pressure on inflation, and may push stock indexes further down.
Inflation
in Eurozone is expected to decline to 8.2% in February vs 8.6% for the previous
month. The Personal Consumption Expenditure Index (PCE) in the United States
was released at 5.4%, beating the previous month’s 5.0%. This may prompt the
Fed to act more aggressively compared to the ECB. This divergence in monetary
expectations may eventually lead to a stronger Dollar and put additional
pressure on risky assets. Officials from central banks are expected to
reiterate their monetary tightening stance amid increasing inflation threats. This
continued hiking of interest rates will
also put pressure on risky assets.
Technically,
the S&P 500 index has changed its upside formation to the downside with the
target at 3650-3750 points. This week, a downside perspective is more likely
for the index. The index is now very close to the resistance at 4010-4030
points, and may bounce lower towards the support level at 3920-3940 points. The
index is unlikely to go further down to 3820-3840 points this week.
The oil
market is seen to face the moment of truth, as Brent crude prices are consolidation
in the middle of the wide trading range of $79-89 per barrel. This time the
price is ready to breakthrough and recession logic suggests that prices are
likely to go down.
Gold prices
are moving inside the mid-term, upside formation with targets at $2000-2100 per
troy ounce by the middle of 2023. Prices are testing the support level at
$1790-1810 per ounce. This is very alarming for gold. If prices pass this
support level and continue down, then the scenario of a possible change of
trend to the downside may become a reality. In this case prices may rewrite
last year’s lows of $1600-1650 per ounce.
The money
market has finally followed upside signals for the American currency. The
Dollar may continue strengthening this week. However, investors should carefully
monitor the Non-Farm Payrolls data that will be released on March 10. If the
data misses the consensus it may lead to a rapid decline of the Dollar across
all currency pairs. 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. 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 at 1.03000-1.03500 are met.