Positive weekly performance for US indices, DJIA gained 0.38% while the S&P500 rose 1.41% and NASDAQ Composite advanced 3.04%.
In Europe the Euro Stoxx 50 advanced 1.79% last week and in UK the FTSE100 was almost flat in 5 trading sessions , and rose only by 0.03%.
With earning season almost completed (95% of companies in the S&P already reported first quarter figures), market sentiment is being driven by 2 principal components at the moment: Debt Ceiling and Inflation.
Treasury secretary Janet Yellen during an interview on NBC’s “Meet the Press.” downplayed the possibility of extra unilateral action and said “My devout hope is that Congress will raise the debt ceiling”. Biden and McCarthy spoke by phone on Sunday afternoon and the President will meet the California Republican on Monday but indications of disagreement remained. Likely to see an increase of volatility before the end of the month, as the CBOE VIX already rose 6.78% last week.
The resiliency of the US economy with a labor market quite robust prevented a more dovish approach for the Fed, but a cooling housing markets (with YoY existing house sales down 23%) and US Commercial Real Estate prices down for first time since 2011, and the worst year for the banking sector since 2008 are elements that are contributing for a 74.3% probability of a 25bp rate cut in November, accordingly to the CME FedWatch Tool. For next month Fed meeting, there is a 82.6% probability that rates would remain between 500-525 bps.
The US Dollar rallied against the Japanese Yen and made gains also the Euro, while it lost ground against the New Zealand Dollar.
On a weekly chart can be seen that the Kiwi dollar tried to rise above the weekly 21SMA and the 55EMA . Also it was trading in the are of the 38.2% Fibonacci retracement of the bearish wave Feb 2021- Oct 2022. The NZDUSD pair had a robust rally after the double bottom made last year but for a long term bullish sentiment would be needed a breakout of the dynamic bearish trendline . Below 0.60 is likely to see selling pressure increase. A rally above 0.6380 could trigger some SL of short positions and buy orders for reversals strategies as well.
EURUSD was down for the second consecutive week and XAUUSD did not manage to keep area 2,000 $/oz as it lost 1.98% last week. If the bearish spikes that built a triple resistance are considered the higher side of a range and the 2022 lows are the lower side, a trading range of medium term of circa 460 $ would be of interest of only investors with a medium/long term holding period. A breakout above 2,090 would be of interest of both short and medium term investors and speculators. If short term traders cannot wait the most recent relative low at 1,822 to validate their bearish view, probably they would to follow more closely 1,935 area, but price spikes that could go against them should be considered.
Most important events for the week will be the FOMC Minutes and the Interest rate decision of the Reserve Bank of New Zealand on Wednesday, where a 25bp cut is what the consensus expects, the US GDP (Q1) on Thursday and Durable Goods orders on Friday , May 26th.
