The S&P 500 is into a large range (between 2500 and 2750) on the daily chart. According to our technical and fundamental analysis, the S&P 500 might rise in the long term, even if it might fall in the next 3 weeks. The increase in equity market volatility preceded the escalation of trade tensions. Following the list of the specific Chinese goods that would be hit with US tariffs and the list of US goods China would target, the S&P 500 posted a reversal pattern in the middle of last week. Some analysts are keen to point out that there are not another $100 bln of US goods imports that China can put a tariff on to match the escalation. There are many other areas in which China can demonstrate its annoyance. Many analysts jump to their selling US Treasuries or depreciating the yuan.
This index managed to finish last week above its 200-day moving average, but it was still around a percentage point lower than when European markets closed. The cuts in the corporate tax schedule are expected to generally lower the effective tax rate as well.
The Gold price may fall in the medium term, according to the daily chart. The price of Gold is into a range at the moment. If the price drops at 76% Fibo ($1316), there is a high probability to fall below EMA 200 ($1298). A potential price target is $1250 in order to form a triangle. The RSI should be considered oversold below 28.
The Federal Reserve could hike rates three times this year as the repatriation tax could lead to internationally-held cash flooding back into the United States. Fed's response to a repatriation of funds could weigh over Gold and strengthen the US dollar.
There could be an increase in deposits within the US onshore banking system, which could boost the money supply and, therefore, induce increased lending. On the other hand, the Federal Reserve could tighten the screws at a faster rate. That could yield a drop in Gold.
The USD/CAD currency pair will continue to rise in the medium term, according to the weekly chart. The U.S. economic outlook is healthy according to the recent economic data. According to the most recent forecast released at the Federal Open Market Committee meeting on March 20, 2018, U.S. GDP growth will rise to 2.7 percent in 2018, 2.4 percent in 2019, and 2.0 percent in 2020.
This estimate takes into account Trump's economic policies. On the other hand, the NAFTA (North American Free Trade Agreement) renegotiation has Canada increasingly worried about bilateral trade under Trump. Pending U.S. tariffs could suddenly shut down billions of dollars of Canadian exports of products like paper and steel pipe.
The main economic data of this week:
US GDP QoQ (+2.7% expectation);( +2.5% previously)
Canada GDP MoM (+0.1% expectation);( +0.1% previously)
YoY (+2.9% expectation);(+3.3% previously)
The GBP/USD currency pair might fall in the medium-long term, according to our analysts. A medium-long term target might be 1.36, where is 50% Fibo on the daily chart. Brexit uncertainty is holding back the economic growth of the UK. There is a highly probability, that the Bank of England keep the interest rate unchanged this year. The unemployment rate might increase or remain unchanged. On the other hand, the U.S. Federal Reserve signaled it still planned to raise interest rates twice in 2018.
The main economic data of this week:
UK CPI MoM (+0.5% expectation); (-0.5% previously)
YoY (+2.8% expectation); (+3.0% previously)
UK Unemployment rate (+4.4% expectation); (+4.4% previously)
UK Employment change ( +84k expectation); (+88k previously)
FOMC rate decision (+1.75% expectation); (+1.50% previously)
BOE rate (+0.50%expectation); (+0.50 previously).
According to our analysts, the NZD/USD currency pair might fall in the medium-long term. The U.S. economy is in a good shape. In 2018, so far, employment and GDP growth have continued to look solid.
Even if the charts show a tight range for this pair in the short term, the New Zealand dollar is expected to fall in the next 3 months. On the other hand, the economy of New Zealand doesn’t meet the most of the analysts’ expectations. New Zealand has its youngest-ever female Prime Minister after a minority party threw its support behind Labour leader Jacinda Ardern.
Important data this week
On Tuesday, will be expected important data from the USA: US CPI MoM (+0.2% expectation; +0.3%previously) and US CPI YoY (+2.2% expectation +2.1% previously). New Zealand Current Account Balance YTD (-2.6% expectation; -2.6% previously) will be waiting on Wednesday. On Thursday, will be released New Zealand GDP QoQ (+0.8% expectation; +0.6% previously), and New Zealand GDP YoY (+3.1% expectation; +2.7% p reviously).
The USD/JPY pair might rise in the medium-long term due to the US and Japan expected economic data. Japan’s central bank chief repeatedly added that the Bank of Japan would not stop buying government bonds. On the other hand, Trump’s tax plan gives a boost to the US economy.
On Wednesday, will be expected important data from the USA: US ADP (expected +200k; +234k previously) and, on Thursday, data from Japan: GDP QoQ ( +0.2% expected; +0.1% previously).
US unemployment rate (expected +4%; +4.1% previously) and US NFP data release (+195k expected; +196k previously) will be waiting on Friday. BOJ will release the rate decision (expected: unchanged at -0.1%).
The USD/CHF pair will rise above 0.9600 in the medium term, according to the weekly chart and market expectations based on the US economic data. Fed chair Jerome Powell makes his first major appearance Tuesday and Thursday when he testifies on the strength of the US economy before congressional committees.
Most of the investors view Powell as slightly more hawkish on monetary policy than Janet Yellen and that could support the dollar more than Janet Yellen’s policies.
There are expected important data from the USA, on Wednesday: US GDP QoQ (expected +2.5% ; +2.6% previous), and US GDP Q4 (expected +2.4%; +2.4% previous).
On Thursday, will be released Swiss GDP YoY (+0.6% expected; +0.6% previous), and US ISM (expected +58.6%; +59.1 previous).
Crude Oil prices might fall in the medium term, according to our technical and fundamental analysis. A target in the medium term might be $57 per barrel where is Fibo 61 on the daily chart.
According to a weekly report from General Electric's Baker Hughes unit, the U.S. oil rig count, an indicator of future production, rose by seven to 798, its highest since April 2015. That marked the first time since June that drillers added rigs for four consecutive weeks. The figure was well up on the 597 rigs that were active a year earlier as energy companies have boosted spending since mid-2016 when crude prices began recovering from a crash.
Surging U.S. production is offsetting efforts by the Organization of the Petroleum Exporting Countries (OPEC) and some other producers including Russia to curb production by 1.8 million barrels per day (bpd) until the end of 2018.
Washington lifted a 40-year ban on most oil exports in late 2015, reshaping the world’s energy map as U.S. crude was shipped to countries like Switzerland, China, Israel and the United Arab Emirates. China and other Asian nations have become big buyers.
The EUR/USD currency pair may grow in the medium term, according to our technical and fundamental analysis. A possible scenario is that the price may break the range to the upside and then continue moving upwards to reach 1.2500.
The most important data about the EUR this week will be the Euro Zone GDP QoQ (+0.6% expected; unchanged previously); MoM (+2.7% expected; unchanged previously), on Wednesday.
There are also expected important data from the USA: US CPI YoY (expected+1.9% ; +2.1% previous), and US retail sales MoM (expected +0.2%; +0.4 previous). On Thursday, will be released US PPI MoM (+0.4% expected; -0.1% previous), and US YoY (expected +2.5%; +2.6 previous).
According to recent data, the Canadian economy is performing well at the moment. Canada had solid economic growth of 3.1% in 2017 and this growth is expected to continue in 2018. The labour market has been thriving, adding 343,000 jobs. While the growth of the Canadian economy is expected to slow to about 2.2% in 2018, this is still decent growth.
The USD/CAD pair might fall at 1.2150 in the next three weeks. The most important data about the CAD this week will be the GDP YoY (+3.4% expected; +3.4% previous); MoM (+0.4% expected; unchanged previously), on Wednesday. On Friday, there are also expected positive data from the USA: NFP (expected+180k ; +148k previous); unemployment rate (expected +4.1% ; +4.1% previous).