Stocks continue to rise but recession fears could cap the upside
S&P500 => The index rises above 3825
BTC/USD => The cryptocurrency steadies around 21k
EUR/GBP => The pair looks towards 0.86
S&P rises despite worrying data
The S&P 500 closed 1% higher yesterday and is set to gain over 3% across the week after three weeks of losses.
This will mark just the second week of gains across 12 weeks. The move higher comes after disappointing data and could be capped as the market continues weighing up the prospect of a recession by aggressive interest rate hiking by the Fed. Data yesterday showed jobless steady at an almost 5-month high, and PMI data highlighted the risks of a recession after falling sharply. Today sentiment remains fragile amid signs that the economy is slowing. New home sales data is expected to show the housing market cooling, and Michigan consumer sentiment is expected to confirm the record low.
Where next for the S&P500?
The S&P500 has rebounded off 3635, the 2022 low. The rising above resistance at 3810 plus the bullish crossover on the MACD are keeping buyers hopeful of further gains.
Buyers will need to rise above resistance at 3870, the May low, to expose the 20 sma at 3930 and the 50 sma at 4050. On the downside, should 3010 fail to hold, sellers could look back to 3700 round number and 3635, with a break below here needed to form a lower low.
BTC/USD steadies after yesterday’s gains.
Bitcoin rose over 5% yesterday as the risk-on mood, and slightly less hawkish Fed Chair Powell helped lift demand for the cryptocurrency.
Bitcoin’s correlation with equities continues and is expected to last for some time. BTCUSD continues to consolidate between 20k – 21.7k after recovering from 17600 at the weekend. It would take a move above 21,700 to create a higher high and invalidate any bearish move, potentially opening the door to a rally to 23,000. Meanwhile, sellers will look for a move below 20k to bring 17600 back into the target, with a break below here needed to extend the bearish trend.
EUR/GBP looks to UK retail sales, German IFO data
EUR/GBP fell yesterday after dismal eurozone data. Eurozone PMI data showed growth slowing to a 16-month low as inflation hits demand.
Manufacturing output contracted for the first time in two years, and service sector activity cooled considerably. The data fueled fears of stagflation and recession. Concerns over gas supply from Russia are also hurting demand for the euro, as supply slows and could be cut off soon. Meanwhile, UK PMI data was far from encouraging but remained steady.
Today the pair is treading water ahead of UK retail sales data, which is expected to show sales falling as inflation rose to a 40-year high. Weak sales data could pull the pound lower. German IFO business sentiment is expected to tick lower.
|UK Composite PMI
EZ Composite PMI
UK retail sales
Ger. IFO bus. climate
|Actual: 53.1 (0)
Actual: 51.9 (2.9)
Expected: -0.7% (2.1%)
Expected: 92.9 (0.1)
Support can be found at 0.8560 (20 sma) and 0.85 (June 17 low).
Resistance for the pair can be seen at 0.8610 (May 12 high) and 0.8640 (23 June)