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18.05.202314:26 Forex Analysis & Reviews: Premarket trading on May 18. Wall Street rally may continue

Futures on the US stock market continue to rise after a decrease amid concerns that the standoff over the debt ceiling could lead to a default. However, they eased following the statements of lawmakers. They are confident that they will reach an agreement by the end of the week. Hence, analysts believe that the world's largest economy will be able to avoid an economic downturn even against the backdrop of high interest rates.

Exchange Rates 18.05.2023 analysis

Futures for the S&P 500 rose by 0.3%, while NASDAQ jumped by 0.5%, signaling further demand for risky assets. Shares of companies from the banking sector also recovered. Stocks of US regional lenders maintained their upward dynamic. Western Alliance Bancorp shares added 2% in the premarket and PacWest Bancorp stock climbed by 6%.

Demand for banking sector stocks improved after Western Alliance reported an increase in deposits this week, which eased fears that the industry would suffer losses due to the outflow of depositors. As a result, investors assume that the U.S. economy could avoid a recession next year as the Fed may end one of the most aggressive tightening cycles in history.

If the worries about the banking crisis wane and the Biden administration and Congress and reach an agreement on the debt ceiling, the risk of a recession may decrease. Treasury note yields fell as it is extremely hard to predict when the Fed could switch to policy easing amid expectations of a stable US economy. So, 2-year government bonds, which are sensitive to rate decisions, traded above 4%.

"I'm confident that we'll get the agreement on the budget and that America will not default," Biden said, shortly before departing to Hiroshima. Speaker McCarthy noted that the parties are still very far apart, but added that it's "possible" they could reach a deal by the end of the week. "We've got a lot of work to do in a short amount of time," McCarthy pointed out.

Today, investors are awaiting the US initial jobless claims, which may give more clues about what to expect from the Fed. Apart from that, existing home sales data will be published.

Exchange Rates 18.05.2023 analysis

As for the technical outlook of the S&P 500 index, the bullish trend persists. The index needs to consolidate above the $4,150 level. After that, a breakout of $4,184 may occur. Bulls also should take control over $4,208, which will boost the bull market. In the case of a downward movement following weak US macro stats, bulls will have to defend $4,150 and $4,116. A breakout will push the trading instrument back to and $4,091 and $,4064.

*A análise de mercado aqui postada destina-se a aumentar o seu conhecimento, mas não dar instruções para fazer uma negociação.

Jakub Novak,
Analytical expert of InstaSpot
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