Inflationary pressures in the US simmered down | 19 August 2022

#SP500:

The S&P 500 marked a much-watched milestone: it retraced half the losses from its steep drop this year in a bullish signal of market recovery. The gauge has also logged its fourth consecutive week higher, putting question marks around the bear market that has haunted equities during a stress-filled summer for traders. The market could still roll over at any time. In other words, we still need a bit more upside follow-through to confirm that the market has indeed retraced more than 50% of its decline. Officials at the Federal Reserve have warned the central bank was a long way from ending its tightening cycle. And a cycle of likely downgrades in earnings forecasts just got under way.

Trading recommendation: range 4150 - 4300.

XAUUSD:

Federal Reserve Bank of Richmond President Thomas Barkin said the central bank needs to keep raising interest rates until it’s clear inflation is running at its 2% target even if the economy weakens to avoid a policy mistake similar to the 1970s. While Fed officials view 2.5% as a neutral rate -- the level that neither speeds up nor slows down the economy -- Barkin said there’s uncertainty about the level and his goal was to have interest rates higher than expected inflation, or positive real rates. Citing research by former Richmond Fed Research Director Marvin Goodfriend, Barkin said the policy mistake of the 1970s was the Fed raising and lowering rates in response to changes in economic conditions even with inflation still too high. High interest rates will have a negative impact on the value of gold.

Trading recommendation: sell 1800 and take profit 1775.

#WTI:

Oil demand in the OECD is estimated to grow by 1.6 mb/d, while the non-OECD is expected to grow by 1.5 mb/d. Total oil demand is expected to average around 100 mb/d in 2022. Preliminary June data indicates total OECD commercial oil stocks rose 20.9 mb m-o-m. At 2,712 mb, inventories were 163 mb below the same period a year ago, 261 mb lower than the latest five-year average, and 236 mb below the 2015–2019 average. In terms of days of forward cover, OECD commercial stocks rose mom in June by 0.1 to stand at 58.9 days. This is 3.7 days below June 2021. This is a positive signal for oil prices.

Trading recommendation: buy 88.00 and take profit 91.50.