Weekly Recap
The testimony of Jerome Powell, the chairman of the Federal Reserve, before the Congress on Wednesday and Thursday, as well as how the markets reacted to it, has been the main topics of discussion this past week.
The FED will continue to raise interest rates over the next several months, and by the end of the year, the fed funds rate may stabilize between 3.0 percent and 3.5 percent, were the two main statements made. In addition, the US economy as a whole slowed down during the first quarter.
Looking at the markets and how they responded to those comments, commodities were under pressure over the week, with gold prices dropping just under 1% while silver was struck harder with a decline of about 4% as fears of a recession pressured the industrial metal, and copper dropped around 8%!
In FX, EURUSD and GBPUSD were slightly positive, JPY lost more than 1% mid-week against the USD, but managed to recoup losses before the weekly candle closed, printing a bearish ‘shooting star’ formation. The Dollar index traded roughly unchanged around the 104 handle with markets having seemingly priced in all Federal interest rate moves and economic data for the time being, allowing for some time for consolidation.
Although there were some positive movements in the crypto currency markets, it is still unclear whether this signals the end of the ‘crypto winter’ or just a moment of peace before the next storm.
Stocks generally closed the week on a good note across all continents as risk sentiment progressively climbed over the week, and the volatility index printed a negative weekly candle, providing a relief. While S&P 500 remains within bear market territory, the Dow Jones recaptured the important psychological levels of 30,000 points.
Coming Up Next Week
Beginning of the third quarter of 2022
The third quarter of the year 2022 will begin this Friday. It is evident from the performance of the main financial asset classes during the course of the second quarter that risk aversion was the main driver of market changes. The equity sectors have been notably impacted by rising inflation fears and geopolitical instability, which are both expected to continue to be significant market drivers throughout the third quarter.
OPEC and non-OPEC Ministerial Meeting
The 30th OPEC and non-OPEC Ministerial Meeting will take place via video conference on Thursday. Markets will be watching to see if producing nations will stick to their plan of gradual production increases of 432 thousand barrels per day for the month of August and if they are willing to make up for the decline in Russian oil production after crude oil prices lost a lot of support over the course of the previous week.
EUROzone Inflation
The ECB recently announced that they are inclined to raise interest rates by 25 basis points at their subsequent meeting in July, but they nevertheless made the decision to let the rate hike amount in September be determined based on inflation statistics. The expectation for headline inflation in June is for it to drop from 8.1 percent to 7.8 percent on an annual basis, despite markets continuing to price in higher inflation forecasts.
Forex Heat Map
Technical Analysis
Our favorite technical chart of the week – GBPJPY
A probable move to the downside is indicated by a top down multi-time frame analysis of the GBPJPY pair. A bearish shooting star candle from areas of resistance, as well as a bearish divergence on squeeze momentum indicators, is both visible on the weekly timeframe. A bearish swing to the downside is visible on the 4-hour chart, which was then followed by a bullish correction. The technical bias is bearish to target levels of 162 on a medium timeframe after waiting for the bullish correction to end an form lower lows on shorter time frames
Economic Calendar
Some key economic releases and risk events are expected during this week. Data from the US, UK as well as OPEC meeting are all expected to drive volatility higher. Make sure to scan the calendar below for the full schedule.
Disclaimer: This article is not investment advice or an investment recommendation and should not be considered as such. The information above is not an invitation to trade and it does not guarantee or predict future performance. The investor is solely responsible for the risk of their decisions. The analysis and commentary presented do not include any consideration of your personal investment objectives, financial circumstances, or needs.
