Review for on December 4 – December 11: what will the Fed say? Forecast for the week on December 14 – 18

By | December 13, 2015

In the week ended stocks came under pressure. Negative sentiment benchmarks demonstrate against the backdrop of lower oil prices, as well as on the eve of preparations for key US Federal Reserve meeting, which is expected to increase rates. US Dow Jones and NASDAQ lost 3.28% and 3.75%, respectively. The German DAX 30 (FDAX) lost 5.38%, came under additional pressure rising euro. HIS Hong Kong completes the week with a total of -5.04%. Stepped up pressure on the benchmark reports of the disappearance of the head of the board of directors Fosun International Ltd. In China, according to the Financial Time, the news sometimes precede official statements about the arrest or detention in corruption cases. What happened. Go Guanchan was the most major Chinese businessman involved in anti-corruption investigations.

Gold (XAU / USD) for a week showed a mixed trend. At the end of five days working metal loses 0.94%. Silver (XAG / USD) has demonstrated more impressive decline, closing at 4.09% lower than the previous week. Brent crude oil finished the week with a fall of 11.94%, while remaining under the influence of OPEC‘s decision, announced on December 4.

Chart of the week:

Brent crude oil chart

Brent crude oil chart

The economic data of the last week:

  • Monday. Germany: October, industrial production 0.2% lower than the forecast of + 0.7%
  • Tuesday. China November exports -6.8% vs. -5.0%
  • Wednesday. The Reserve Bank of New Zealand decided to lower the rate to 2.5% from 2.75%
  • Thursday. Australia in November, the employment rate of 71.4 thousand. Above the forecast -10.0 thousand.
  • Friday. US November retail sales of 0.2% vs. 0.3%

Forecast for the week on December 14 – 18

Stock market

All the attention of the market in the coming week will be focused on the decision of the US Federal Reserve‘s monetary policy, which will be announced on December 16. The fact that the regulator will raise the rate, there is almost no doubt. According to the data of the positions in the futures rate, today the likelihood of such an outcome has risen to 83.3% (against 79% the previous week). The fact of increase has been included in the price and is likely to provoke a reaction is not active. Where more interest will cause comments that the regulator will do after the meeting.

On the one hand, the US economy is feeling relatively well. But on the other hand, falling commodity prices could put downward pressure on consumer prices. Thus, if after a meeting of representatives of the Federal Reserve will understand that a further increase will occur very gradually, the dollar could come under pressure. At the same time the stock market this situation will be quite favorable. Against this background, the US indices may resume growth. Dow Jones (YM) will be able to return to the level of 17900. Nasdaq (NQ) sets his sights on a return to the resistance at 4730.00.

Commodity and raw market

Brent crude oil remained under pressure. Black gold can not recover from the blow dealt by the decision of OPEC. Recall that the cartel not only went to the decline in production, but could not work out at all any quota for the first time in decades. In fact, all this gives grounds to believe that production will be limited only by the company’s production capacity. As it became known, in November, production of OPEC member countries grew by 230.1 thousand barrels per day to 31.7 million. Of course, this only adds to fears of increasing oversupply in the world market. Negativity is added and the IEA forecasts that in 2016 that the increase in global consumption will slow to 1.23 million barrels per day from 1.79 million in 2015.

Technically Brent, breaking support at 40.00, opens its way on down to the level of 36.20 (2008 low). At this stage, the main factors that can contribute to a turn (while in the short term) look data on commercial stocks in the US, provided that the second week in a row affected by the fall, as well as evidence of acceleration of the fall in production in the United States (the latest figures reflected a decrease of 38 thousand barrels per day). Taking into account the fact that last year the number of drilling rigs operating in the US fell by 67% (does not currently have a working drilling of 524 units), such expectations are natural. Provided that they are justified, oil can still aim for a return to the area of ​​the level of 40.00.

Currency market

The decision of the US Federal Reserve‘s monetary policy can make its own changes in the dynamics of the major pairs. It is worth recalling that in the past, the dollar has grown, thanks to the expectations of the imminent start of the tightening cycle. However, if the market does not receive evidence that the rate the US regulator will raise aggressively, the dollar could come under pressure. Against this background the pair USD / JPY could fall to the district level of 118.80. An additional factor in favor of the yen could be the solution for the monetary policy of the Bank of Japan, which will be announced on 18 December. Recall that the revised GDP data for the country did not confirm the entry of the economy in a recession, and this reduces the chances of additional stimulus.

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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