It supposed to be a week of relief after a violate end of the May and it was like that yesterday. However, it has also been confirmed that the rally on financial markets is built on fragile foundations and traders have to remain vigilant because for whatever reason everything can collapse. Yesterday a sudden decrease in the US debt market (10Y yield fell from 2.99% to 2.92%) raised fears that there is a reason to run into safe heaven securities like bonds. The risk aversion supported the USD (despite the decline in profitability), and the profit gained from JPY and CHF. Today we see further consequences of the risk-off mode with a sell-off in equity markets or risk currencies (AUD, CAD, NZD).
Information noise adds fuel to unrest and every topic is used as a potential reason for changes in asset prices, even if none of them has a specific impulse that can move investors. Nevertheless, the discussions revolve around the starting G7 summit, through the next week's Fed and ECB meetings, until the meeting of US President Donald Trump with the leader of North Korea, Kim Jong Unem. These events should be ignored - in any case - but there are no grounds for strong speculation at this time. This, however, shows how deep wounds the investors have after the previous month (dollar rally, Italian political crisis) and the resulting trauma causes them to overreact. If anything can be associated with the G7, then predict that tensions in trade relations will remain or even get worse, which in time may again be reflected in the market sentiment. However, there are no solid grounds for panic at the moment.
Let's now take a look at the SP500 technical picture at the H4 time frame at the beginning of the G7 Summit. The market is approaching the recent swing high at the level of 280.62 on hopes the summit outcome will be positive. Nevertheless, market expectations are not excessive, hence the Monday reaction to the final statement should be limited. There is still technical resistance at the level of 278.85 ahead of the high, so the bull camp must push strong to break through this level. The nearest support is seen at the level of 274.15 and this is the key level for bulls. If they lose it, then the control over the market will be regained by bears.
