Forecast for the week from September 25th through September 29th:
There are mixed signals this week. On the one hand, downtrend is likely to continue due to US dollar strengthening, as gold and dollar historically move in the opposite directions. Currently Chicago futures market estimates the probability of Fed rate hike in December by 72% against 40% a week before. That is a positive signal for greenback. On the other hand, risk assets demand may drop, which will in its turn support gold as the safe asset. Gold and shares also have inverse relationships, so if shares show a nice correction, gold will get strong support. Trading signals: flat 1280-1310.
Oil market correction to the downside is long overdue, however we are not observing price drop. Will we see correction in the last week of September? I think so because there are two signals supporting it. First of all, the USA have recovered from intense hurricane in Texas, oil output has exceeded the last year high. Oil inventories have increased three weeks in a row, which is bad for bulls. Oil inventories in USA increased by 15 million barrels. Second of all, the market anticipates US dollar strengthening because Fed is ready to raise interest rate one more time this year. I would like to remind you that investors didn't expect the Central bank to make this decision. Trading signals: Sell 56,30/57,10 and take profit 54,20.
This week no important US macroeconomic statistics is expected, for this reason I would recommend to look for credit market dynamics opportunities. This market gives us signals for selling. Firstly, Treasury securities yield is growing two weeks in a row, which has negative impact on shares. Bonds are safer assets than shares, and when their yield increases, investors actively buy these instruments. Secondly, it's worth to mention spread reduction for two-year and ten-year Treasury bonds after Fed meeting. Such dynamics also puts pressure on shares. Trading signals: Sell 2505/2520 and take profit 2481.