Undecided markets awaited clarification on the Russian-Ukrainian situation, the euro weakened
Markets were rather undecided last week as there is still no clarity on the Russian-Ukrainian situation. Falling benchmark treasury yields and rallying gold suggest some risk aversion. But then the massive stock sell-off was not very engaged. Meanwhile, the price of crude oil hovered within the established range on contradictory developments.
In the currency markets, the New Zealand dollar finished as the strongest, followed by the Aussie. But the yen and the Swiss franc were recovering towards the end of the week. The euro was the worst performer, followed by the Canadian, then the dollar. Sterling was shuffled down the middle.
The S&P 500 turned lower but remained resilient
The S&P 500 fell on risk aversion last week, but there has been no catastrophe yet. The prior rejection by the 55-day EMA is a bearish sign. But it holds the support at 4278.94, as well as the 55 week EMA so far. Price moves off the 4818.62 high could still turn into a sideways consolidation pattern, and a firm break of the 55-day EMA (now at 4541.30) will result in a retest of 4818.62 .
However, sustained trading below 4278.94 and the 55-week EMA (now at 4304.51) will indicate that it is already in a deep medium-term correction. The fall from 4818.62 would target a 38.2% retracement from 2191.86 to 4818.62 at 3815.19 at least, before forming a bottom.
NASDAQ will defend 12552 fibonacci support
Also, it should be noted that the development of the NASDAQ has been more bearish as it has already pulled out a support level equivalent to 1481.69 and 55 week EMA for quite some time. The correction from 16212.22 is already close to the 38.2% retracement from 6631.42 to 16212.22 at 12552.35.
For now, we still expect strong support at 12552.35 to provide a bounce. But a sustained breakout would open a deeper medium-term correction towards a 61.8% retracement at 10291.28. This, if it happens, could drag the S&P 500 through the 4278.94 support area mentioned above.
The 10-year yield failed again at 2%
The 10-year yield failed to close 2% last week and fell. 2.065 now looks like a short-term high and there should be some consolidation below this short-term level. But the decline should be contained above the 1.743 support to bring another rally. We expect a test of the key resistance area at the 2.159/87 cluster level, or at least an attempt.
The 2.159/87 area represents a 61.8% retracement from 3.248 to 0.398 at 2.159, and a 61.8% projection from 0.398 to 1.765 from 1.343 to 2.187. This level should not be eliminated decisively, unless the markets believe that inflation would spiral out of control of the Fed. Meanwhile, a firm break of the 1.743 support would be an indication of a drastic shift in global risk sentiment, which is still not likely.
The dollar index should remain in the range between 94.29 and 97.44
The dollar index remains stuck in a range between 94.62/97.44 last week. For now, it looks like there won’t be enough momentum to break through the 61.8% retracement from 102.99 to 89.20 to 97.72 in the near term, even if there’s a rally. the rise. Instead, DXY would turn sideways, in a range above the 38.2% retracement from 89.20 to 97.44 to 94.29.
The medium term bias will remain to the upside as long as 94.29 holds. But a firm break there will cause a deep pullback to a 61.8% retracement at 92.34 or even reverse the uptrend from 89.20.
Gold has resumed its rally, heading towards the 1946 projection level
Gold’s rally resumed last week and cleared the 1900 handle. The outlook will remain bullish as long as 1944.30 support holds. The upside from 1682.60 is underway and further upside should be seen through resistance at 1916.30 at the 100% projection from 1682.60 to 1877.05 from 1752.12 to 1946.57.
It should also be noted that the firm break of 1916.30 should confirm the completion of the correction from 2074.84 to 1682.60. A new breakout of 1946.57 will suggest an upward acceleration in the medium term. In this case, a retest of the 2074.84 high should be within reach soon.
WTI crude oil still in favor of the 100 target handle
WTI Crude Oil initially fell on news of an Iran nuclear deal, but then rebounded again on risk aversion. For now, WTI is holding above the 88.66 support. Thus, the near-term outlook remains bullish for a further rise from 95.98 towards 100 handle. However, the breakout of 88.66 will now indicate that it is a deeper correction towards a 38.2% retracement from 66.46 to 95.98 at 84.70.
Bitcoin will return to 33k support after the rebound ends
Bitcoin’s decline over the past week suggests that the rebound from 33000 ended at 45862. This came after rejection by a 38.2% retracement from 68986 to 33000 at 46476. The development suggests that the downtrend wider from 68986 is not complete. The break of the 32980 support will bring deeper the 33000 support, then the 29261 support next.
EUR/CHF Weekly Outlook
EUR/CHF decline from 1.0610 extended lower last week and break of 1.0439 support indicates rebound from 1.0298 low has ended at 1.0610 . This came after rejection by a 38.2% retracement from 1.1149 to 1.0298 at 1.0623. The initial bias is now tilted lower this week, retesting the 1.0298 low. On the upside, minor resistance above 1.0480 will first turn the intraday bias into neutral.
Overall, a medium-term bottom has formed at 1.0298 on the bullish convergence condition of the daily MACD. The rebound from there is still tentatively seen as part of a corrective pattern. That is, a broader downtrend from 1.2004 (2018) could further extend from 1.0298 to a 61.8% projection from 1.2004 to 1.0505 to 1 .1149 to 1.0223. However, sustained trading above the 55-week EMA (now at 1.0667) will signal that the downtrend is over and bring back a stronger rise to 1.1149 next.
In the long-term picture, the prior rejection by the 55-month EMA (now at 1.0947) maintains the long-term downtrend. The downtrend from 1.2004 may continue to decline as long as 1.1149 resistance holds.