The euro-dollar is further lengthening the pace pending the Fed. What are the possible scenarios in the short term?
As we said a few weeks ago, certain conditions would have had to occur in order to see a rise in the euro-dollar.
I am referring primarily to greater security for the European economy and to an effective joint response by EU governments.
This actually came and a good part of the euro-dollar recovery was also supported by a sharp drop in the greenback.
In my opinion, in order to be able to see further cross increases, more elements will be needed and I think it is quite difficult that they will arrive for two reasons.
The first is that at this stage some stability is also needed from the point of view of currency fluctuations.
The second is that from a fundamental point of view, the specter of deflation is returning to Europe, i.e. a very weak price dynamics, consumption that languishes, families that accumulate and an economy that is entering a situation of concern and this is reflected also on future consumption.
The response that the Central Banks give is given by additional liquidity and by spending plans that can counteract this trend in consumption.
This could reveal them even more in Europe, therefore from a point of view strictly linked to a comparison between the EU and the EU economy, there are more bearish pressures than bullish pressures for the next few weeks.
Added to this are weak macro data, also in light of which the context of relative strength of the single currency is not so justified.
It will be important to see now what will happen with the Fed meeting to evaluate what President Powell’s attitude will be.
The cartridges have been a little fired and therefore it is difficult to witness moves that point to adding more liquidity to the system, although anything can happen.
In general my idea is that the euro-dollar may have basically arrived and we may see some reversals. Be careful, however, because we may also witness a fairly long consolidation phase.
A withdrawal from present values could bring the euro-dollar back towards 1.13 and then towards 1.125 / 1.12.
Gold is lengthening its pace after regaining the $ 1,700 threshold. Do you expect further increases?
We have always said that for gold it was possible to confirm a correct value between 1,700 and 1,725 dollars.
The movement we are witnessing now is linked both to a weakening of the dollar and to the anticipatory movement of what could happen on the stock markets.
We have seen that the latter have started to struggle a bit compared to previous progressions and usually gold moves a little earlier.
With a confirmation of the prices above $ 1,720, gold could go upwards because it would certainly trigger a series of dynamics that also from a temporal point of view could foreshadow a reversal of the stock markets.
Oil is retreating after trying to put its head back above $ 40 a barrel. Has the race to the top ended?
At least for now the race to the upside of oil may be over. There is some movement that goes against the trend with regard to gold, oil and riskier assets such as emerging ones.
Black gold is actually moving a bit against the trend, despite the moves of OPEC and OPEC + on the availability to extend production cuts also in July.
My idea is that the rise in oil is now over, also because I believe that the 35/36 dollars are its value in this historical phase, waiting to understand what kind of answer there will be on the demand side.
The fact that oil has gone above $ 35-36 is due to a rally of hope / confidence that the markets have experienced a bit on various fronts and that are now getting a bit back.
The dynamics of oil could see a bit of a reversal, not excessive, but there could be a return to the 36/35 dollars per barrel I mentioned earlier.
In light of this intermarket framework, what predictions can be made for the stock exchanges?
Already since yesterday we have seen a situation in which, despite the rally of the stock exchanges, there have been discordant results on other instruments that are basically related.
In recent weeks there has been a series of important purchases on all the assets that have converted into this stock rally which has brought some indices close to the historical highs and in some cases even beyond.
These elements are fading a little, in the sense that there is no longer the concord seen until last week and there is a bit of diversification on the assets that penalizes the riskiest assets, but also the commodities.
So there is a kind of alarm bell that maybe the stock exchange rally is running out.
There are no breakdowns on the horizon, but some crunches begin to be heard, even before witnessing a significant and serious setback in the stock indices, the S & P500 will have to drop below $ 3,150.
This would negate the movement of the past week and the entry into a market that can at least rationalize a downsizing.