The president of the Fed, Jerome Powell, affirmed last Wednesday the probability of a rise of half a percentage point (0.50%) if inflation continues stubbornly high. The move would raise borrowing costs from near zero, where they have been since the start of the Covid pandemic, for businesses and consumers. This would bring two main reasons to shrink the economy worse than in the midst of a pandemic: a slowdown in the economy and the prospect that other investments, such as bonds, become more attractive relative to stocks. Wall street would remain withdrawn until the FED changes its position.
When the Federal Reserve raises its benchmark interest rate, banks and lenders also tend to raise borrowing costs. Mortgages, credit cards, and other debt become more expensive, reducing consumer spending and demand. Companies also pay more to finance their operations.
For its part, the Central Bank of England plans to maintain its rate hike cycle with a forecast of 0.25% more, leaving a total of half a percentage point for this Thursday. GBPUSD would return to its buying levels above 1.34. Once 1.3450 is reached, the buying pressure will remain constant. EURUSD for its part will be forced to react. The European Central Bank could testify to positive projections for this year. EURUSD remains with high buy potential between the 1.1180 and 1.12 zone. The preference remains buyer.
USDCAD remains buyer above 1.2750 with potential for take profit. Short preference below 1.2750 to 1.2730 and 1.2720. USDJPY remains mixed at its highs of 115.0. The preference is to sell below 115.50 to 115.0, only below 115.0 the sell pressure would increase to change the direction of the cross. USDCHF remains buyer with short preference below 0.93 until 0.9290 and 0.9250 thereafter.
The commodities market is estimated to return to its buying levels. Gold remains sell below 1800.0 with high buy potential above 1790.0. The preference is buyer from current levels. Once the zone reaches 1800.0 dollars, the reference levels are 1810. And 1815.0. Silver accompanies buyers around 22.50. Waiting for potential buyer levels, even below 23.0 we do not change strategies with silver and it remains at a reference minimum for the buyer.
SP500 index remains in the zone of high potential buyer. Employment and production data for the week could cooperate with US stocks. The preference is buyer over 4500 to 4630 and 4670 points.