Source: PaxForex Premium Analytics Portal, Fundamental Insight
The Final US S&P Global Manufacturing PMI for March is predicted at 52.5. Forex traders can compare this to the US S&P Global Manufacturing PMI for February, reported at 52.2.
US Construction Spending for February is predicted to rise 0.7% monthly. Forex traders can compare this to US Construction Spending for January, which decreased 0.2% monthly.
The US ISM Manufacturing Index for March is predicted at 48.5, and ISM Prices Paid at 53.3. Forex traders can compare this to the US ISM Manufacturing Index for February, reported at 47.8, and ISM Prices Paid at 52.5.
The new trading week will begin with lower volumes, as most developed markets remain closed for Easter Monday. Bullishness in US equity markets, driven by the ongoing AI hype and hopes for interest rate cuts, is in dangerous territory that creates conditions for sharp 10%+ corrections. FOMO has driven prices higher after the S&P500 reached an intra-day low near 4,100, from where investors piled into equity markets driven by hopes of up to six 25 basis point interest rate cuts by the US Fed.
After the US Fed announced that it planned for three 25 basis point interest rate cuts, the rally resumed, ignoring the potential impact on financial markets. Underlying economic reports show a slowing economy with high inflation, and the US Fed may only deliver one interest rate cut this year, with the potential of none. Historically, the most dangerous time for investors and equity markets is when the US Fed cuts interest rates for the first time after a hiking cycle. The risks for an ongoing rally after a blockbuster first quarter are to the downside, and markets will adjust accordingly.
The forecast for the SP500 remains cautiously bearish despite the massive rally fueled by excessive bullishness. While the Tenkan-sen and the Kijun-sen maintain their uptrend, the Ichimoku Kinko Hyo Cloud began to flatten out with the Senkou Span A and the Senkou Span B flatlining. Traders should also monitor the CCI in extreme overbought territory, where a negative divergence has formed. A sustained breakdown below 100 could trigger a counter-trend sell-off. This technical indicator has plenty of downside potential to lead this equity index lower. Can bears overpower bulls and regain control over the SP500 to force price action into its horizontal support area, which engulfs the psychological 5,000 level? Subscribe to the PaxForex Daily Fundamental Analysis and earn over 5,000 pips per month.
Should price action for the SP500 Index remain inside the or breakdown below the 5,250 to 5,300 zone, PaxForex recommends the following trade set-up:
- Timeframe: D1
- Recommendation: Short Position
- Entry Level: Short Position @ 5.275
- Take Profit Zone: 4.980 – 5.050
- Stop Loss Level: 5.350
Should price action for the SP500 Index breakout above 5,300, PaxForex recommends the following trade set-up:
- Timeframe: D1
- Recommendation: Long Position
- Entry Level: Long Position @ 5.350
- Take Profit Zone: 5.400 – 5.460
- Stop Loss Level: 5.300
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