All eyes on Fed & ECB minutes
S&P500 => The index falls towards 3800
Oil => The commodity steadies around $100
EUR/GBP => The pair falls below 0.86
S&P500 falls ahead of FOMC minutes
The S&P500 closed in positive territory yesterday, paring early losses, thanks to a strong rebound in tech stocks.
The reversal of an inversion in Treasury yields which usually signals a recession helped lift the market mood. Today the futures are falling as attention shifts to the US economic calendar with ISM services PMI, JOLTS job openings, and the minutes of the June FOMC meeting due.
The market will be watching the minutes closely for any hints as to whether the Fed will hike by 50 – 75 basis points in the coming meeting and the variables being considered. The market is currently fully pricing in a 75 bp hike. A hawkish-sounding Fed could pull stocks lower.
| US ISM services PMI
JOLTS job openings |
Expected: 54.5 (1.4)
Expected: 11M (0.4M) |
Previous: 55.9
Previous: 11.4 M |
Where next for the S&P500?
After running into resistance at 3950 and rebounding lower, the S&P500 is consolidating, capped on the upside by 3855 and on the lower side by 3740.
The long lower wicks on the candles this week suggest that there is little acceptance at the lower price. The RSI is just below neutral. A breakout trade would see buyers look for a move over 3855 to bring 3950 into target and create a higher high. Sellers will look for a move below 3740 to bring 3635 the 2022 low into play, with a move below here needed to create a lower low.
Oil consolidates around $100
Oil prices tanked just shy of 10% yesterday, pulling the price below $100 per barrel for the first time in two months as recession fears overwhelmed the market.
The prospect of slowing global growth is hurting the demand outlook. Adding to the bearish mood towards oil Citigroup forecast that oil prices could fall to $65 a barrel by the end of the year and fall to $45 by the end next year. The drop in price comes even as supply remains tight with Norwegian oil workers striking reducing output.
Today the price remains subdued consolidating around $100 as attention turns to EIA stockpile data.
EUR/GBP looks to ECB minutes, UK politics
EUR/GBP fell 0.3% yesterday as the euro tumbled across the board.
The euro fell as recession fears rose following PMI data which showed that business activity grew at the slowest pace in 16 months in June. The threat of gas shortages potentially disrupting industrial activity across the region, should Russia cut off supplies also dragged on the euro. ECB hiking bets have also been trimmed against the deteriorating backdrop.
Meanwhile, the pound also came under pressure as two cabinet ministers resigned leaving the Prime Minister’s future in doubt. Today the pair is rising as attention remains on Downing Street. There is also plenty of eurozone data, including retail sales and the minutes of the June ECB meeting.
| EZ Composite PMI
EZ retail sales |
Actual: 52 (2.8)
Expected: 0.4% (1.7%) |
Previous: 54.8
Previous: -1.3% |
Support can be found at 0.8550 (June 30 low) and 0.8525 (yesterday’s low).
Resistance for the pair can be seen at 0.8627 (weekly high) and 0.8680 (July high).
