We should sell Brent | 17 Juni 2016

The forecast for the week 13 一 17 of June:

XAU/USD:

This week a mixed background is being formed for gold. On the one hand, reduced "appetite for risk" is a positive factor for gold. A notable surge of the fear index VIX of the last week indicates an outflow of capital from risky assets. In this regard, investors may choose gold as a more safe asset. On the other hand, drop of the oil prices is a negative factor for gold as inflation expectations in the G-7 countries are falling and XAU/USD is used as an inflation hedge. The last two days of the past week, great sales had been done in the commodity market. It is a positive factor for USD as the cost of raw materials is denominated in the US currency. What is good for USD, is bad for gold 一 these two instruments have a strong negative correlation. This week we should expect a flat market within the range 1245 一 1295.

Brent:

During the week we should expect a drop of quotations as investors settle on profit their long positions. Since January 20 of this year, quotations of the "black gold" has grown by 91%. So, against the negative news background, investors are expected to close their long positions. What was the negative news background caused by? The last Friday, the oil service company Baker Hughes reported an increase in the number of drilling rigs in the USA and Canada by 3 and 16 units, respectively. For the two weeks in a row, we had wintessed growth in the number of drilling rigs by 12 units. Let me remind you that the last Wednesday US Department of Energy reported an increase in oil production to the highest level for the last 18 weeks. Increase in the number of drilling rigs can boost oil production again. Now it is profitable to accelerate capacity as prices rose dramatically as compared to January's Lows, whereas most of the oil companies are burdened with a huge debt. To avoid bankruptcy, they need to redeem a debt and thus accelerate production. This factor, in turn, puts pirce of hydrocarbons under pressure. This week we should open Sell positions on growth of quotations to 50.80 / 52.00 and take profit at 48.50.

S&P500:

The main event of this trading week is the meeting of the US Federal Reserve scheduled for June 15. Yield of 2-years' treasuries that is closely correlated to the interest rate suggests that we should not expect changes in the monetary policy. Since the last FED's meeting held on April 27, the yield had dropped by 9 points. Investors will focus on what money authorities will say about summer's outlook of the rate's raise as well as their forecast for the next three years. Based on the macroeconomic data published the last month, we can expect a moderately positive comment by the US Fed's that will boost yield of treasuries and put the stock market under pressure. In her Monday's speech, FOMC chief J. Yellen said that consumer spendings are expected to grow in the coming months. It is a signal of GDP's and inflation growth. This week we should open Sell positions on growth of quotations to 2104/2115 and take profit at 2080.