Expansive Economic Cycle Still Supports Markets

Macroeconomic Outlook

The past week was mainly influenced by two relevant factors:

Oil Price

o It has reached the benchmark of $80 per barrel

o It has raised concerns about inflation

Ten-year Treasury Yield is at 3.07
Italian Elections

o Populist coalition between the 5 Star Movement and The League

This has increased the difference between Italian’s debt to the German one by 155 basis points
Depreciation of the Euro against the dollar

So how can these factors influence this week

It is reasonable to consider a positive impact rather than a negative one

o Italian coalition creates further stability to other outcomes

Such as Italy leaving the Euro

o Oil price can still rise due to tension in the Arabic region

It can prompt more concerns about inflation
However, it is unlikely to change expectations in the monetary policy in central banks
Which will support markets
$80 barrel is a reasonable price within an expansive economic cycle

Regarding macro indicators, to be published in the coming week:

PMI in the eurozone

o It will consolidate the current slower growth compared to the beginning of the year, however, it will show guidance towards a bigger upcoming economic cycle

The economic cycle will be the clear guidance toward a positive environment
The outlook is still positive for the markets which are facing the second semester in a good context of moderate globalisation

Technical Outlook

US Dollar Index

Monthly resistance has been broken leaving a space until the next one. Hence, it is confirming the continuation of a solid bullish trend through the breakout of this resistance, which leaves space to capture until the next one. A retest may happen to confirm the breakout. In that case, it would be reasonable to double the trade.

EURUSD

After breaking and retesting the last weekly resistance, it has confirmed the strength of this bearish trend. It recently touched the profit target, and the strength of the trend shows it has more downturn potential in the coming days. There are no significant resistances ahead which leave more space for another bearish position.

GBPUSD

After a strong bearish trend, GBPUSD may find a turning point in the coming days, thanks to the monthly resistances ahead. They are significantly strong and may confirm a bounce back.

USDJPY

USDJY is moving according to our expectations, and it is about to complete the bullish run. When it reaches its benchmarks, which is the monthly resistance ahead, it will be possible to consider a turning back point on the chart.

Crude Oil

After continuing the bullish trend, it has again touched bullish resistance which gives a reason to still believe in an upcoming downturn. For now, under normal conditions, it would be good to hold, and in case it breaks above the resistance the position would be closed.

DAX

With no significant resistances ahead and after strongly breaking the previous ones, DAX has a clear bullish route to complete until the next significant resistance. For now, holding the position would be the right decision, since both chart and fundamentals confirm a positive outlook for the markets.