When the oil is growing. Forecast for the week on February 1-5

By | January 31, 2016

Equity markets finished the week on the positive. In general, this is understandable, taking into account the fact that the PBOC continues to inject liquidity in order to stabilize the situation, and the US Federal Reserve made it clear that to force the issue with the rate increase will not be. Plus stimulating monetary policy of the European Central Bank and the Bank of Japan, Bank of England statements of that raising rates is not the time, as well as the recovery of oil prices and the picture is quite favorable. The largest growth in the last week was the Japanese Nikkei (NKD), which added 3.44% against the decision of the Japanese regulator. US Dow Jones rose by 2.25%. NASDAQ added 0.54%. The German DAX 30 (FDAX) ended the week virtually unchanged (+ 0.14%). Hong Kong HSI continued to recover and closed the week higher by 1.28%.

Pair USD / CAD fell to the level of 1.4017, shedding 1.01%. USD / JPY showed an increase of 1.97%, mainly responding to the decision of the Bank of Japan to introduce negative rates.

Raw materials and precious metals showed positive dynamics. Brent crude oil finished the second week of growth. Quotes black gold strengthened to 11.56%. Gold (XAU / USD) added 1.85%. Silver (XAG / USD) appreciated by 1.71%. In many ways, this dynamics of metals due to the fact that the market is beginning to be put on a long pause that the Fed will take before the next rate increase.

Chart of the week:

nikkei chart

Nikkei chart

The economic data of the last week:

  • Monday. Germany in January, the index of economic expectations IFO 102,4 against forecast 104,1
  • Tuesday . US January Consumer Confidence 98.1 – above the forecast of 96.5
  • Wednesday. US Federal Reserve kept interest rates unchanged in the range of 0.25 – 0.5%. The accompanying statement was “softer” previous
  • Thursday. US: December, orders for durable goods have fallen by 5.1% against expectations of a 0.6% fall
  • Friday. US: Q4 GDP growth of 0.7% vs. 0.8%

Forecast for the week on February 1-5

Stock market

The Fed and the Bank of Japan gave the stock markets rather positive attitude. US regulators softened the tone of the accompanying statement. The Bank of Japan introduced a negative rate in order to stimulate the economy and to achieve the inflation target of 2%. Next week will attract the attention of a number of reports from the US, which will shed light on possible further actions of the Federal Reserve. This data on the index of business activity (ISM) in the industrial sector and the services the US. It will also report on private sector employment from the APD.

But the main attention is drawn to the report on the labor market, the published Friday. And the market will assess not only the number of newly created jobs, but also data on average hourly wages, which will allow to estimate inflation at this level. Provided that the statistics from the US will not be enough optimistic, the market still more will start to be put on the likelihood that in March we should not expect the US Fed rate hike (to date according to the positions of futures on a bet the probability is estimated at 15.5 %). Against this background, Dow Jones (YM) can continue to recover to the level of 16450 and, further, to 16675. Nasdaq (NQ) after a level of 4245.00 would target the rise to the level of 4370.20.

Commodity and raw market

Oil prices last week noted a three-week highs, rising to the level of 36.71. Key support quotes Brent crude oil gained from rumors that in February it may take meeting of the OPEC countries with other oil-producing countries, which will focus on reducing the volume of production (an average of 5%), which led to the closing of short positions . But in order to continue the growth of black gold will need the facts. Of course, the chances that the parties come to any compromise there. But the probability that agreement is reached on the synchronous decline, yet not too large. Therefore, it is possible that in the coming week, Brent will be kept within the range of 31.00 – 36.00 dollars a barrel.

In general, during the week the market will traditionally follow the dynamics of the index of commercial stocks and the state of production in the United States. Last week, for the first time after 6 weeks of growth of production in the US fell, which, in general, naturally, taking into account the reduction in the number of drilling rigs operating (70%). If such dynamics will become kind of trend, it will be perceived by the market, with due optimism, pushing the quotes in the area of ​​the upper limit. Although, if the part of Saudi Arabia it was confirmed willingness to negotiate, it is possible that the quotes rather quickly set his sights on a motion in district 39.00 level.

Currency market

This week a decision on the monetary policy of the Reserve Bank of Australia will announce. It is worth recalling that in the minutes of the December meeting the regulator noted that he expects the strengthening of economic growth in the next two years, noting the gradual diversification of the economy. In addition, recent data on the labor market in Australia, confirmed the third month of strong growth of employment in the country, are further evidence of a fairly stable situation. Besides, the aussie is at a low enough level to provide support to the economy. It is possible that this time the Reserve Bank of Australia will refrain from lowering rates. But the most strong support for AUD / USD pair may receive if the second meeting in a row will not be verbal intervention aimed at weakening “Australian“. In this case, one of the immediate objectives of growth may be a mark 0.7260.

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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