Review for December 14-18: on the market before the festive mood. Forecast for the week on January 21 – 25

By | December 20, 2015
In the week ended equity indices showed mixed trends. Rising early in the week gave way to a fall in its second half. The German DAX 30 (FDAX) rose 2.44%, including by getting the support of the incident euro. Hong Kong HIS also finished the week higher by 2.53%. But the US Dow Jones and the NASDAQ closed with a loss of 1.22% and 0.61%, respectively. After an initial positive reaction to the Fed‘s decision to raise the rate (which the market took as a sign of recognition of the regulator sufficient strength of the economy), benchmarks came under pressure. In part, this was due to the fall in oil prices and the decline in stock prices of commodity companies.
The negative dynamics of oil prices continue to rise, and asked the pair USD / CAD. Her quotes rose by 1.48%. The British pound lost 2% against the dollar. One of the factors of pressure on the pair GBP / USD began to weak data on the labor market of the country. In particular, the slowdown in growth of average wages.
Gold (XAU / USD) for a week has demonstrated a mixed trend, falling under the influence of the US Fed‘s decision, however, on Friday failed to recover part of the losses. At the end of five days working metal loses 0.96%. Silver (XAG / USD) has demonstrated growth, having strengthened by 1.08%. Brent crude oil finished the week down 3.79%, while remaining under the influence of fear of the gain imbalance of supply and demand on the world market.
Chart of the week:
brent crude oil chart

Brent crude oil chart

The economic data of the last week:
  • Monday. Eurozone: October, industrial production 0.6% higher than the forecast of 0.3%
  • Tuesday . US: November index of CPI + 0,5% against the forecast of 0.0%
  • Wednesday. US Federal Reserve decided to raise to 0.5% from 0.25%
  • Thursday. UK: November retail sales of 1.7% higher than the forecast of 0.5%
  • Friday. Bank of Japan kept interest rates at 0.1% and announced an increase in the volume of purchases from April ETF 300 billion yen

Forecast for the week on January 21 – 25

Stock market

The market is entering in the before the festive season. Usually on the eve of Christmas, American benchmarks show “Santa rally“. It is possible that a moderate strengthening of the index, and we will see over the coming weeks short, the more that the Fed clearly signaled that further tightening of monetary policy will be gradually (as a guideline increase of 100 basis points during 2016). However, the regulator’s decision demonstrates that it is quite optimistic about the state of the economy.

Therefore, if the published economic data is strong enough, the US indices may get an additional boost to growth. December 22 will be published final data on US GDP growth in the 3rd quarter. Wait for an active response to the report is only in the event that the figures will undergo substantial revision. Also noteworthy data on orders for durable goods and a report on new home sales. So, in the case of positive data, Dow Jones (YM) will be able to return to the level of 17690. Nasdaq (NQ) sets his sights on a return to the level at 4685.00. Although we should not forget that the activity in the market will decline in anticipation of the holidays, and on this background can pretty sharp and unpredictable fluctuations in prices.

Commodity and raw market

Attempting to roll back the level of 36.73 (a minimum of 14 December) is not too successful. Moreover, on Friday quotes of Brent copied at least in the moment of falling to around 36.39. Overall, at the current stage, the fundamental backdrop remains negative for oil. Fears of growing imbalance of supply are not reduced. The market is still impressed by the results of the last meeting of OPEC, which was not taken a decision on production quotas, which in fact, has made this index unregulated and once again confirmed the readiness of the cartel fight for their market share. In favor of the black gold goes and US Federal Reserve decision to raise rates.

Against this backdrop, the dollar strengthened, making it denominated assets more cheaply. But at the same time, OPEC‘s secretary general expressed fairly optimistic vein on oil prices, noting that they will resume growth in a few months. But such statements now the market does not care. Next week the market will usually monitor the data on commercial stocks in the US from the Energy Information Agency, as well as the state of production in the United States. The latest report reflected the growth of these indicators, while the market is waiting for signs of production cuts in the United States, as the number of working drilling in the country at 67% less than the year before. If the trend continues, the pessimism regarding the prospects of the oil can be added. But as long as the price is not fixed below level of 36.20 (at least 2008), open short positions is not necessary.

Currency market

This week the euro zone does not publish a large number of meaningful reports. Therefore, quite a high probability that the pair EUR / USD will continue to act out the divergence in monetary policy of the European Central Bank and the US Federal Reserve. After the December meeting, it is obvious. European regulators extended the duration of the program of quantitative easing, and made it clear that, if necessary, will proceed in the direction of the stimulus, as the current mandate does not limit it to the measures taken. At the same time, the Fed, though, and made it clear that further tightening will be gradual, yet on the path of normalization of monetary policy. Against this background, the EUR / USD may continue to move in the support area 1.0680.

Warning: Profitability in the past does not mean profitability in the future. Any projections are for information only and does not guarantee a result.

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