Oil may continue to grow. Forecast for the week on March 21 – March 25

By | March 20, 2016

In the week ended equity indices showed mixed trends. The growth leaders broke CHILE, which added 3.22%. Hong Kong HSI rose by 2.41%. The growth of the US Dow Jones, NASDAQ and S & P was less impressive: 1.8%, 0.96% and 0.92%, respectively. In general, this is understandable, since on the one hand, soft Fed comments on monetary policy prospects are for the benefit of benchmarks, but on the other hand, everybody understands what the regulator’s decision is due to fears of weak growth rate of the economy, and it already is and lead to a decrease in corporate profits. German DAX30 rose by 0.94%. In part, limiting the growth of the benchmark factor was the strengthening of the euro, triggered by the weakness of the dollar after the publication of the Fed decision.

Commodity assets also closed the week on an optimistic note. Brent crude oil has updated a maximum of more than 3 months, up to the level of 42.52 dollars per barrel, having strengthened by 2.73%. Precious metals were able to recover the losses suffered earlier in the week on expectations of more aggressive Fed statements regarding monetary policy, since the US regulator did not meet market expectations. Gold (XAU / USD) ended the week with a total of 0.45%. Silver (XAG / USD) showed a significant growth, adding 1.94%.

Chart of the week:

Brent crude oil chart

Brent crude oil chart

The economic data of the last week:

  • Monday. China in January, industrial production + 5.4% lower than the forecast of + 5.6%
  • Tuesday. The Bank of Japan kept interest rates and the volume of the quantitative easing program unchanged
  • Wednesday. US Federal Reserve kept interest rates unchanged. “Soft” regulator comments lowered expectations to raise rates in the coming months
  • Thursday. Norwegian Central Bank lowered the rate by 25 basis points to 0.5%, noting the likelihood of further easing

Forecast for the week on March 21 – March 25

Stock market

The German DAX 30 index stumbled upon a rather strong resistance level of 10055.0 area. While pass this barrier benchmark fails. In general, it is not surprising, since European Central Bank head Mario Draghi made it clear that under the current conditions do not see any reason for further rate cuts. In addition, the growth index and prevents a fairly high rate of common European currency. Next week will be published some interesting reports. This index of economic expectations of the IFO, the index of business sentiment from the ZEW, and data on business activity in the industrial sector and in the sphere of services in Germany.

If the statistics will be relatively weak, reflecting the deterioration in business expectations and the slowdown in the major sectors of the economy, DAX 30 (FDAX) can develop a short-term decline in the level of 9770.0 district. However, taking into account the fact that the weak numbers could return expectations that the European Central Bank will still be forced to continue to stimulate the economy in the future will be able to cause a reversal of the dynamics at 180 degrees. Therefore, the current decline can be fun to open short positions to buy.

Commodity and raw market

London Brent crude oil attempted to break out of the previously established range of 38.00 – 41.45 and in the moment quotes rose to a mark of 42.52, but to gain a foothold on the progress it failed. As a result, the day Brent completed at 41.40. However, the current pattern suggests that Brent will try once again to continue to grow. Firstly, the growth rate of commercial stocks in the US is slowing. Second, in the United States recorded decrease in production volumes, which seems quite logical on the background of a sharp drop in the number of operating rigs. Although, of course, a key factor supporting the black gold are meeting the expectations of the largest oil-producing countries, both within and outside OPEC, the total production of nearly 73% of the world total.

The market expects that an agreement will be reached on the freeze, because all are well aware that to hold a meeting of such level and find a compromise solution, then collapse the price of black gold. Of course, lightning correct the imbalance of supply and demand will not happen, but in the medium term, this goal can be achieved. Thus, Brent has a chance to continue movement in the district level after the break above 43.50 resistance 42.40.

Currency market

GBP / USD pair continues to retreat from earlier lows. In part, this contributes to the weakening of the dollar, caused by a “soft” attitude the US Federal Reserve. But the results of the last meeting of the MPC also give a mild cause for optimism. The Bank of England said productivity growth, the strengthening of the labor market that supports incomes and consumer demand. Also, the regulator has made it clear that his next step will likely be a rate increase.
In light of the fact that one of the main risk to the economy is low inflation, quite interesting looking data on the consumer price index, which will be published next week. Also, attention should be paid on retail sales data in the UK. If the figures reflect, albeit small, but the increase in price pressure and increased consumer activity, the pound may continue to grow in the short term. The immediate goal of the upward movement may be a mark 1.4570.
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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