FED Speakers boosting markets ahead of Inflation data
While technically latest free fall in the stock market could create an opportunity for many investors and traders, on the other hand, FED Speakers also helped the market sentiment to get some of their losses back.
John Williams, N.Y FED Governor, said he is expecting a soft landing for the economy with about a 2% GDP growth rate and a slight rise in unemployment, which is more optimistic than earlier thoughts. Loretta Mester from Cleveland FED is also downplaying the labor market risks. However, she believes that to bring the inflation down towards the 2% target, FED needs to raise the rates above their 'neutral' level.
This Wednesday, the market participants will focus on the US April CPI data. The monthly rate expectations lowered to 0.2%, far lower than the previous month of 1.2%. It is expected to ease to 8.1%, lower than 8.5% in March on the annual scale. If the data is as expected, it will confirm the idea of softening from the worse situation, and we have already passed the peak. According to a New York Fed survey, median one-year and three-year inflation expectations were recorded at 6.3% and 3.9% in April, compared with 6.6% and 3.7% previously.
As of yesterday's close, SP500 fell below the critical level of 4,000 points for the first time since April last year. ND100 continued to hit its lowest point since November 2020, closing at 12,204. And DJI hit a new low this year at 32,264. Overall, US stocks posted their worst three-day loss since September 2020. Today, the market was volatile and mostly more bearish than tomorrow's inflation numbers and President Biden's speech on inflation.
Gold prices, as a reaction, reduced as market sentiment changed, and now investors are turning their capital a bit towards stock markets. We should not forget that a stronger US Dollar also helps this sentiment. Higher risks in the market in the short term are not expected. The market seems already priced on these tensions and risks on the geopolitical front. On the other hand, gold-backed ETFs tracked by Bloomberg show net outflows have been recorded over the past two weeks. Not only that, but CFTC data also shows that gold has been sold off sharply by the market in the past three weeks, with net long positions plummeting - a combination of headwinds that have kept gold prices under pressure, down more than 11% from this year's highs. However, all these mentioned reasons in the short term can put the gold under pressure, but in the longer term, it is under question; we have to wait and see.
From the technical point of view also, the gold trend remains bearish. Price moves under main MA lines, under its 61.8% Fibonacci level, and MACD histograms also are well under 0-level. On the other hand, the market volume moves in line with its 20DMA, as you can see in the bellow figure. 1,857 and 1,892 US Dollars are the intense resistance levels. We cannot confirm the bullish trend as long as yellow metal could not recover above 1,892 dollars.
