Oil is looking for catalysts. Forecast for the week on February 22 – 26

By | February 21, 2016

In the week ended stocks showed recovery from the lows reached earlier. Positive attitude has spread to all regions. It is worth noting that even the pessimistic report of the January meeting of the US Federal Reserve did not introduce substantial changes in the dynamics of the indices. The leaders of growth turned out to be German DAX30, which added up to a week 4, 5% largely on expectations of additional stimulus from the European Central Bank in March. The growth showed Hong Kong HSI, which grew by 4.41%. The US Dow Jones rose by 2.74% and the NASDAQ finished the week higher by 3.66%.

The impressive growth (13.08%) was led by Brazil‘s Vale (VALE). Support asset received amid reports that the company is close to launch iron ore mines in the world’s largest within the Carajas complex in the Brazilian state of Amazonia. It is expected that the mine capacity will amount to 90 million tons of ore per year, which corresponds to a quarter of the current level of production Vale. Quotes reached 1.5-month high at 3.21.

The AUD / USD was able to gain a foothold on the week by 0.64%, given enough optimistic from the Minutes of the meeting and the Reserve Bank of Australia, virtually ignoring the labor market data, which proved to be rather weak. The unemployment rate increased to 6% from 5.8% previously.

Precious metals, on the background of the stock market correction at the beginning of the week came under pressure. However, its completion Gold (XAU / USD) was able to recover most of the losses on expectations of a longer pause before the next rise in the US Fed. A week yellow metal ended lower by 0.9%. Copper (HG) rose by 2.33% against the general relatively optimistic about the commodity markets. Brent crude oil showed mixed trends, but still was able to demonstrate growth by 0.95% to the closing level of the previous week.

Chart of the week:

vale chart

Vale chart

The economic data of the last week:

  • Monday. Japan. Q4 GDP -0.4%, -1.4% versus + 0.3%, + 1.3% previously
  • Tuesday . Saudi Arabia and Russia agreed to “freeze” of oil production at the levels of January 11, 2016
  • Wednesday. Minutes of the last FOMC meeting showed that the majority of the growth sees risks for the US economy
  • Thursday. China in January, CPI + 1.8% – the maximum annual increase since last August
  • Friday. US January CPI + 1.4% – higher than the forecast of + 1.3%

Forecast for the week on February 22 – 26

Stock market

Next week is scheduled to be published quite a number of reports from the United States. This data on business activity in the industrial sector and the services sector (PMI Markit), and a report on new home sales and data on personal income and spending. But special attention should be paid to data on orders for durable goods and revised data on the growth rate of the economy in the 4th quarter.

In the current environment, any signs that the US economy begins to show signs of cooling, may be enough to be put on the market has become even more prolonged pause in raising the US Fed. In this case, even a small reminder that the world’s largest economy feels stable enough, it may be enough to ensure that stocks were again under pressure. Dow Jones (YM) can go back to the support at 15600. Nasdaq (NQ) may undertake an attempt to return 3983.00.

Commodity and raw market

Brent crude oil prices continue to be held within the previously established range of 30.00 – 36.20. Still, one of the key pressures on the black gold are concerns of increasing demand and supply imbalance in the global market. The fact that the agreement to freeze production at the January level, reached by Russia and Saudi Arabia, and was joined by some other countries, is not enough to reduce the excess supply in the short term.

But at the same time, talks between OPEC and non-OPEC will continue with a view to reaching a compromise in the actions aimed at the stabilization of oil prices. And waiting for new steps in this direction at least to be able to keep the oil away from the lower range breakthrough. Thus, any comments indicating willingness to oil-producing countries to compromise, can easily return the quotation source of energy for growth. In addition, a positive signal for “black gold” can be data on US production volumes. In the past 4 weeks demonstrates the reduction rate, as evidenced by data from EIA. If this trend continues, in the moment, will be able to get the support of Brent.

Currency market

This week the UK economic calendar does not contain a large number of meaningful reports. The only thing you should pay attention – final data on GDP growth in the 4th quarter. But not even this report may have a key influence on the dynamics of the pair. At the final week, it was reported that British Prime Minister David Cameron has yet achieved a special status for the UK in the European Union. According to the prime minister, such agreements allow it to “agitate the country to remain in the EU“.

Taking into account the fact that the results of the latest polls already show that for an exit from the EU is ready to vote has less than half the country’s population, the probability of such an outcome is reduced, which will support the pound. Moreover, the economic data and does not give much reason for disappointment. labor market data were strong enough – in a country marked decline in the number of applications for unemployment benefits and the acceleration of average wage growth to 2% from 1.9% a month earlier. Retail sales on a monthly basis showed an increase of 2.3% in January, the biggest increase in the last 2 years. Taken together, these factors may well have a pair GBP / USD support, aiming its growth to the level of 1.4650.

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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