Uncertain markets have been seen in recent periods as fears over inflation and economic slowdowns in the world are on the rise. While risks still prevail due to increased volatility, many are eager to know whether the FOMC minutes that are set to be released following a Federal Reserve announcement might help stocks bounce back again.
Next week’s market report will center on the important economic indicators and market movers of interest to traders, mainly on natural gas, DAX, and gold. All three are uniquely positioned within current market conditions, so all of them offer possible price movements that can be worthwhile to traders.
Keeping ahead of market action, specifically to the release of FOMC minutes and other data points, is going to be crucial for positioning to good market action. Technical analysis and key market indicators have to form the backbone of a forward-looking approach while working through this week’s trading opportunities.
Bullish Divergence Focus
Natural Gas
Bullish signals are reflected by the natural gas market, mainly in the appearance of an RSI divergence suggesting upward momentum. Here’s how things may go for this week for natural gas:
- Technical Set-up: We observed an RSI divergence on the daily chart, so it is indicative of a possible reversal pattern. Following the series of lower lows, a break of structure occurred, indicating potential bullish movement. A strong reaction of the market at the level of $2.70 will determine how the situation develops further. If the price reaches new highs, it’s advisable to take a pullback from there to get a nice entry point at the support from $2.50.
- Target price levels: Traders may attempt to go long there around the $2.50 area with some imbalances. If the market stays here at this area of support, then an extension is likely to move on higher. The next and very significant resistance points of note would be at around $2.70 followed by new highs established that may present themselves throughout the course of the week.
- Risk Considerations: When support breaks below $2.50, there will be diminishing bullish pressure. The strength of volume and RSI trends must be positive.
Comdolls:
Natural Gas has a more significant upside trading setup for bullish traders expecting continued higher prices, but there is a patience factor if a trader wants to position himself better on a subsequent retest of support.
The European markets, especially the DAX, appear to be more risk-averse, given technical indicators that are bearish and a potential shift in market psychology.
- Technical Analysis: We have a bearish divergence on DAX in its RSI. This RSI divergence has been somewhat weakening the momentum, the fresh break of structure on the downside confirmed the negativity, and we see today that the previous support has become resistance. A look at the four-hour chart shows that a sell here, at this time, correlates with both RSI and moving average crossover signals. It could continue to show bearish behavior.
- Potential Moves: Above 16,200, and the DAX may continue on to 16,500. Failure to breach would then have it down to recent lows in the region of 15,400. Key will be to see how it reacts at those levels and whether there’s a failure to clear which then could present short opportunities using a tighter stop.
- Market Sentiment: European stocks are going to stay on the back foot, as the global economy is uncertain, especially with all the discussions about inflation. DAX is going to follow the overall market risk-off behavior unless there is a strong catalyst for the risk-on sentiment.
The DAX currently leans bearish, with technical analysis showing a continuation lower. The trader needs to be cautious with entries and ensure that stop levels are well defined above recent highs.
Gold: Range-Bound with Key Support and Resistance Levels
Gold has woken up again as a safe haven asset amid all the worries related to economic uncertainty particularly as the dollar fluctuation, with a rise being influenced by concerns over U.S. inflation. Anyway, technical analysts say gold probably won’t leave its medium-term range for now.
- Range Expectations: The 50-day moving average is approaching a potential crossover below the 100-day moving average, with the 200-day moving average providing strong support near $1,900. That is probably going to be the price range where gold may consolidate between $1,900 and $1,940, with the occasional spike above or below that.
- Key Levels: The price fall to the zone of $1,900 should provoke buying interest to defend it. On the other side, $1,940 acts as a crucial resistance zone that may check any positive movement. RSI and volume indicators need to be observed very closely to get an idea of the strength or weakness as the metal approaches those levels.
- FOMC Minutes: This week’s moves in gold may largely depend on the release of the FOMC minutes. If there are hawkish undertones, then it would drive gold lower. In contrast, dovish undertones may be welcome with the help of safe haven.
The consolidation phase offers scope for range traders, though the volatility in events such as the FOMC minutes may change prices fast.
Important Events to Focus This Week
It’s also on Wednesday when the markets will be expecting several important events to come out:
- RBNZ Rate Decision: The Reserve Bank of New Zealand will publish its latest interest rate decision, giving clues about this smaller but influential economy in Asia-Pacific. Any change might affect currency pairs and will have a sentiment across APAC markets.
- Release: UK Consumer Price Index Report: Should shed some light on British inflation. If it increases further, debates on interest rates might make a return at the Bank of England, and so touch on GBP pairs along with UK stocks.
- FOMC Minutes: The most anticipated event of the week will be the minutes from the last meeting of the Federal Reserve, and it is going to provide investors with clues about what the Fed has planned for interest rates. Hawkish minutes may weigh on risk assets, and dovish comments may encourage a risk-on environment.
Will Markets Recover Post-FOMC Minutes?
The list of economically significant releases running next week is long, and most of that action will likely take place on Wednesday. Market reaction to the releases will be something traders should pay very close attention to as they represent some critical insights toward future direction. Here are three major plays in quick recap:
- Natural Gas: The bull could sustain itself in the form of a run higher if this support holds good at $2.50. Watch out for signals in the RSI coupled with the reactions in prices at crucial resistance levels.
- DAX: Bearish divergence is now coupled with the recent breakdowns in DAX. This again presents significant possibilities of further downturn. Critical points to track would be at resistance near 16,200 and at supports close to 15,400.
- Gold: Range bound between $1,900 and $1,940. The actual movements are very much going to be decided by the minutes of FOMC; keep watch out for the breakouts above this range.
This week, the FOMC minutes are going to act as a catalyst in the market sentiment. Risk-off moves are going to be triggered by hawkish notes and may continue to pressure the equity markets further. However, dovish tones might encourage a bounce in the risk assets.
Conclusion
Not only technical insights but also major economic events knowledge will help in navigating this week’s market opportunities. The proactive approach, built on the strength of technical analysis and strategic positioning, will enable traders to seize the reaction of the market to FOMC minutes and other economic releases.
Traders can prepare for the week by monitoring natural gas, DAX, and gold, keeping an eye on pivotal data points, and so on. Now, market swings are there, and a disciplined rules-based approach is going to make all the difference in trading risks and opportunities. Trading is about timing, strategy, and adapting to the new information; stay well-informed, stay ready, and trade well.
