Sell oil! | 25 11月 2016

The forecast for the week 21 - 25 of November:

XAU/USD:

Over the last two weeks gold has not been in demand among investors. This week we will see a continuation of the downtrend again. First, US dollar rate in the foreign exchange market has surged. Since gold and US currency are traded in different directions, further strengthening of USD amid rising yield of treasuries is to push gold down. Now ten-years' US treasuries offer 2.35% yield - the highest level over the past year. We can not ignore rally on stock markets, especially in the United States and Japan as well as weakening of the Japanese yen, which also affect gold price. Gold as well as the yen is safe asset, and the high demand on stock markets has a negative impact on both instruments. S&P500 index is being traded near historic highs and this week it can overcome this milestone.I open Sell trades at 1215/1230 and put take profit at 1192.

Brent:

I expect decline of oil for two reasons. First, release of the oilfield services company Baker Hughes indicates that on Wednesday we can see growth of US oil reserves again. Baker Hughes reported an increase in the number of drilling rigs in North America: by 19 units in the United States and by 11 units in Canada, in Mexico - by 2 units. The number of vertical systems in the USA surged by 7 units, and there we can see a high percentage of oil recovery. Thus, growth of production will have a negative impact on oil prices, as supply increases and demand remains unchanged, showing minor fluctuations. Second, a significant strengthening of the US currency should have a negative impact on oil: over the past two weeks, the dollar index USDX basket added 4.45%, while Brent crude oil strengthened by 2.7% for this period. Lack of correlation and this dynamics usually lead to strong sales in the oil market. I open Sell trades at 47.70/48.40 and put take profit at 44.00.

S&P500:

Here is a rather interesting situation. On the one hand, positive macroeconomic statistics on the US retail sales and construction sector indicate an increase in consumer activity. This week will not be so rich in terms of releases. The two reports will be made: on Tuesday, the report on house sales on the secondary market and on Wednesday - the report on durable goods orders. Given growth in consumer activity, we can expected the data above the medians of forecases that allow investors to update the historical maximum on the index (2194.4). But the psychological level of 2200 will be a strong barrier because of significant increase of yield of US treasuries. Since the beginning of the month yield of ten-years' treasuries jumped by 0.52%, whereas S&P500 index rose by 2.8% and yet ignores thedynamics. But this will not continue for long and in the near future we can expect correction on the stock market. I open Sell trades at 2200/2215 and put take profit at 2167.