US stock indices and commodities opened modestly higher this week as risk sentiment improved. Last week the US Federal Reserve announced a quarter-point hike to the Fed’s benchmark rate but also acknowledged that the central bank considered pausing the increases because of instability in the banking sector. At the same time, the Bank of England, Swiss National Bank and European Central Bank signalled that they would continue to raise rates to crush inflation.
Moving ahead to this week, the important economic events to watch are the series of inflation numbers from Germany and the Eurozone, the US GDP, the PCE price index and consumer confidence data.
On the earnings front, the companies scheduled to release their last quarter financial results this week will be Lululemon, PVH, Micron and BioNTech.
Gold prices have been under the spotlight throughout this month after the metal bounced back strongly from its previous month's lows. However, in the last few days, the metal remains undecided as to which way its next directional break will be. On Friday, the safe haven metal retreated back to below $1980 as fears surrounding the banking sector subsided towards the end of the week.
For this week, $2009/10 remains the key resistance to watch, the bullish breakout of $2010 will likely push the gold into a new trading zone, which may offer further buying opportunities until $2018 then $2030. On the downside, $1965 is the immediate support level, followed by $1958. If the metal breaks below $1958, the slump will quickly extend toward the $1945/40 mark.
The greenback started the new week on a positive note after the St. Louis Fed President James Bullard indicated Friday that the US central bank is nowhere near done with its tightening stance and it will have to raise rates higher. While It has been a rough month for the dollar as markets bet the Federal Reserve will halt its raising of interest rates due to the sudden collapse of Silicon Valley Bank. This week in the US, the main event of interest is US GDP data and the PCE expenditure price index.
DXY is trading steadily above the 103 area but seemed limited in its attempts to move higher in the short term. This week's resistance for the DXY appears to be around 103.35. If the price break and closes above 103.40, the next upside level to watch is 103.60 then 103.80. On the downside, if the greenback breaks and close below the 103 area again the next immediate downside area is to watch 102.70 and 102.40.
EUR/USD price action remained volatile, the pair ended lower on Friday after staging a strong rally following the shares of German banking giant Deutsche Bank plunging more than 12%. The stock tanked after the bank said it would redeem $1.5 billion in a set of tier 2 notes due in 2028 and as its credit default swaps surged to the highest. While ECB President Christine Lagarde tried to ease concerns by telling EU leaders the euro area banking sector was resilient and that the central bank toolkit was equipped to provide liquidity to the financial system if needed. This week, again the movement of the US dollar and the latest inflation numbers from Germany and the Eurozone is likely to significantly affect the currency pair.
For Euro this week, the first key support level is located at 1.0700. In case the pair breaks below this level, it will head towards the next support level which is located at nearly 1.0660. On the flip side, a move above 1.0840 again will push the pair into a new trading zone, which may offer further buying opportunities until the 1.0900 and 1.0940 zones.
Dow Jones and other US indices ended a volatile week slightly higher on Friday boosted by positive comments from Treasury Secretary Janet Yellen and Fed’s Bullard but the banking sector was under pressure. Yellen announced Friday she called an unscheduled meeting of the Financial Stability Oversight Council or FSOC which was created in the wake of the 2008 financial crisis to help the government combat threats to financial stability. For the Dow, the main attraction for this week is Investors waiting for the US GDP and PCE inflation data, which could trigger volatility in the market.
This week, the immediate resistance is located for the index around 32,500, a break above this level will confirm a possible move to 32,800 and 33,000. On the downside, if the bearish momentum continues bears will probably try to achieve the previously tested support at 31,600/400.
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