Sell Gold and Oil | 14 April 2017

Forecast for the week April 10-14:

XAU/USD:

During the week gold will weaken due to US dollar strengthening. US dollar index has increased two trading weeks in a row and now it is only 1% to go till the nearest strong USDX resistance level. As greenback and gold have historical negative correlation, USD quotes rise will put pressure on gold. Friday March USA labor market release brought several surprises. Bad news is that quarterly Non-Farm didn't manage to reach 600 thousand – in total it is 533 thousand, which is 20.7% more than in forth quarter of 2016. Initially market had counted on 600 thousand new jobs.

Good news is that U6 unemployment rate (a fuller rate than overall unemployment rate) reached 8.9%, it is new low since January 2008. During the 2000s US economy grew quickly, U6 index average rate was 8.9% and now the economy has almost reached full employment. That means Fed will almost certainly raise interest rate at its meeting on June 14th, which will have a positive impact on dollar price. Trading recommendation: Sell 1256/1272 and take profit 1241.

Brent:

Consider opening sell positions for two reasons. First of all, quotes may be revised due to negative US statistics. US oil output increases 7 weeks in a row and this tendency may continue considering Baker Hughes Friday release: number of operating drilling rigs has reached 672 units, that's the highest since May 8th 2015. This week is short due to day off on Friday, April 14th and traders may take profit on long positions because oil has strengthened by 8.2% over the last two weeks.

Second of all, as was mentioned earlier, US currency quotes increased over the last two weeks and this will put pressure on oil quotes, as oil is quoted in US dollars. Trading recommendation: Sell 55,70/57,00 and take profit 53,10.

S&P500:

On Monday American stock market will show its weakness because VIX is growing. On previous Friday VIX increased on emerging markets and European sites, which signals falling risk appetite. We believe, one may consider using correction to 2346/2322 region and open Buy positions. Corporate reporting season starts in USA. It can please investors with strong data due to ISM increase. Thursday is key corporate reporting day financial giants reporting such as Citigroup, JPMorgan Chase, Wells Fargo. We will expect positive data releases, as Fed implemented rate hike in December 2016, which caused net interest margin increase. Trading recommendation: Buy 2355/2322 and take profit 2374,5.