Financial markets are never easy to predict. With the global economies responding to inflation trends, the latest policies by central banks, and mixed sector performances, traders are increasingly finding it hard to predict which way the market will turn. For instance, NASDAQ 100 rose for the third consecutive week, while Dow Jones and S&P 500 have remained flat, raising a question about the broader health of the markets.
With so much uncertainty in the air, U.S. retail sales, crude oil inventory reports, the Australian employment data, and central bank speeches will be key indicators. These events give traders the critical insight needed to identify opportunities both for and against the market’s momentum.
This week’s market activity is offering some great trading opportunities. Using economic data and sharp technical analysis, traders can position to capitalize on market fluctuations in key areas such as equities, commodities, and forex pairs. Here is a full breakdown of what to expect and how to be prepared for the probable market movements.
NASDAQ 100: A Balance of Momentum and Caution
The NASDAQ 100 on its part stood out by registering a third week in the green catapulted by strong gains from heavyweights in tech such as Apple, Google, and Microsoft. Still, some underlying signs exist that may mean this rally is about to lose its steam.
Bearish Divergence
The RSI once gave an indication of a bearish divergence in the daily timeframe wherein, while the price was continuing to head north, momentum showed a weakening trend. It thus showed that the bullish momentum may not sustain after all.
Resistance Levels
The index currently strives for the 13,700 zone as a possible bullish breakout point. Conversely, in case bearish signals remain in place, the index is likely to trace back to 13,000.
Technical Watch
A market structure break is seen. Failure to sustain high and showing weakness will indicate a trend reversal over the next few days.
Action Plan: Day traders can closely watch momentum indicators and volume for initial breaks down, while swing traders may look towards short opportunities if the three-week index breaks below meaningful supports.
GBP/USD (Cable): At a Crossroads
This would indeed translate into the British Pound setting the timing for its critical moment in juxtaposition with the U.S. Dollar, bolstered by a hawkish BoE that raised rates 25 bps and upgraded its forecasts of growth. Yet again, questions arise: Whether GBP is overbought or still has room for an additional rally?
Inverted Head and Shoulders Pattern
A classic bullish reversal setup has been formed on the daily chart. This, in addition to the crossovers of moving averages – 50-day crossing above the 100- and 200-day – advances the case for upside.
1.268 Resistance
A proper breakout will require Cable to break above the 1.268 level. Further, traders could target 1.3 as a longer-term objective.
Sentiment
With bearish sentiment surrounding the dollar, the GBP could gain further upside momentum, especially if U.S. retail sales disappoint.
Action Plan: The intraday trader can enter on pullbacks to important support areas; a position trader may wait for the confirmation of the breakout and take long positions.
Crude Oil: Bearish Overtones Linger
Crude oil markets have struggled for direction of late due to growing fears of an economic slowdown. Recent inventory data only added to the bearish sentiment as the country recorded a surprise surplus of 3 million barrels against a forecasted deficit of 2.2 million barrels.
Technical Levels
The $64 mark provided a brief congestion low for the month of March last week. Bearish structure remains in place until prices can be seen breaking above $77.
Key Drivers
The Saudi Arabia-led production cut provided a short-term bullish push, but it didn’t take long for the market to retrace those gains.
Outlook
A break below $63 in crude oil could trigger another wave of selling into the low $50s. Only a sustained break above $77 would be bullish and target $85.
Action Plan: Oil traders will watch midweek inventory data and OPEC headlines for possible catalysts.
Australian Dollar: Employment Report in the Spotlight
The Australian dollar has been resilient since the unexpected rate increase by the RBA. However, the forthcoming employment report might prove to be a game-changer.
Bearish Signals on AUD/JPY
Although it had a very strong start, price action is weakening, and the pair could not hold above the 200-day moving average.
Critical Support Levels
Below 87.8, the recent fresh lows may be opened; upsides should be limited by resistance at 91.5 level.
Employment Data
A strong report could reinforce the RBA’s hawkish stance, while weaker numbers might readdress the bearish pressure.
Action Plan: Traders to watch for volatility in AUD pairs in Thursday’s Asia-Pacific session; trendline breaks and significant price action around key levels.
U.S. Dollar Index (DXY): Awaiting a Breakout
The Dollar Index is stuck in a tight range, and traders’ bets are divided on the direction thereafter. Central bank commentary as well as economic data – especially U.S. retail-sales figures – may dictate its course over the week ahead.
Descending Triangle
The DXY shows a consolidation pattern and is expected to break out soon.
Key Levels
A close above 102.5 on a daily basis would confirm a continuation of upside, while a break below 98.2 supports the case for sustained bearishness.
Central Bank Commentary
Perhaps the most widely anticipated event of the week is Friday’s speech from Federal Reserve Chairman Jerome Powell. This event coincides with a possible change in sentiment.
Action Plan: Traders should be prepared for sharp moves in the dollar, especially following Powell’s remarks and the release of retail sales data earlier in the week.
Events to Watch in Market
- Monday: Empire State Manufacturing Index – a potentially market-moving event ahead of US retail sales.
- Tuesday: Claimant Count Change – U.K; U.S Retail Sales: Important leading indicator for the GBP/USD and wider market sentiment.
- Wednesday: Crude Oil Inventory Data – A barometer for energy markets.
- Thursday: Australian Employment Report – This is likely to make AUD pairs volatile.
- Friday: Central Bank Speeches – Commentary from the Federal Reserve and the ECB could set the tone for next week.
Practical Trading Tips
- Fundamentals Focus: Trading opportunities are to be initiated with the release of economic data, but confirmation from technical analysis always needs to be attached to it.
- Exploit Technical Analysis: Head and shoulder, RSI divergence, and moving average crossovers are some of the patterns that convey a very useful message about the direction of the market.
- Manage Your Risk: Higher volatility means higher risk. You can safeguard your money by adopting stop-loss and position sizing.
- Know What Is Happening: Central bank commentary can have far-reaching implications. Keep an eye on scheduled speeches and adjust positions accordingly.
Conclusion
The hot retail sales will ignite the summer markets with sizzling potential, besides some key events including crude oil inventories and the Australian employment report that will drive this week’s market action.
Traders have much to play off of, from potential NASDAQ 100 reversals to GBP/USD breakouts and crude oil momentum shifts. It all boils down to watching, preparation, analysis of the interaction between the fundamental and technical aspects, and disciplined execution.
