Global macro overview for 10/05/2018

On Wednesday, Wall Street was able to react calmly to the situation that arose after the US withdrew from the deal with Iran. Before the session, the price of oil rose by about three percent, which is much more than on Tuesday. This, however, could even help the indexes, because it raised stock prices in the energy sector. In addition, Europeans have argued that the deal with Iran is not dead and that they will abide by it. Donald Trump also claimed that if Iran wants to conclude a better agreement for the US, he is ready for discussion. It does not have to lead to a good solution, but it certainly helped to calm down the mood.

The US data form April inflation at producer prices (PPI) was published. It turned out that inflation rose by 2.6% y/y and 0.1% m/m which was worse than anticipated by the global investors(expected 2.9% y/y and 0.3% m/m). For some time, this data has already been closely watched, because eventually production prices may go to CPI, and this would increase the yield on US bonds. This, in turn, would further support the US Dollar across the board due to the Fed monetary policy anticipation (another hike this year).

Wall Street has behaved quite surprisingly. Over three percent increase in the price of oil helped in nearly two-and-a-half percent increase in the energy sector, which had the strongest impact on the broad market. However, the return of 10-year US bond yields to 3.0% could have worsened the market. Not only did he not worry, he even helped because he raised stock prices in the financial sector.

Let's now take a look at the SP500 technical picture at the H4 timeframe. The price attacked and broke the downward trend line, which began in late March this year - it ended the day with a one percent increase. Such a breakthrough of the trend line, being at the same time a break from the four-month triangle, is a buy signal, but the traders should be very cautious about this signal: at any time, bond yields or a trade war with China can harm the markets. Moreover, there is a longer-term trend line (golden in color on the chart) that still hasn't been tested. The next target fur bulls are seen at the level of 271.47 and the immediate support is seen at the level of 267.96.

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