The dollar may receive additional incentives for growth. Forecast for the week on March 28 – April 1

By | March 27, 2016

In the week ended stocks interrupted growth. In addition to technical factors, intervened in the case and the geopolitical risks in the form of explosions in Brussels on Tuesday, and a fairly aggressive comments from the US Federal Reserve. During the week, we heard a number of statements that the Federal Reserve, it might make sense to consider a rate hike already at the meeting to be held in April. On this background benchmarks showed mixed movement, and to the final short working week came with expressionless results. The US Dow Jones and S & P fell 0.23% and 0.43%, respectively. German DAX30 lost 0.4%. Some support benchmark was against the background of a downward correction of the pair EUR / USD. Hong Kong HSI fell 3.04%, including, and amid reports of lifting the ban on the sale of shares in China.

The largest growth was the pair USD / CAD, which appeared 2.03%. Falling oil prices and a revision to increase the US GDP for the 4th quarter allowed the pair to roll back from recent lows. GBP / USD pair has become a leader in the fall, down 2.38%. A key factor in the pressure on the pound are growing concerns about the possible withdrawal of Great Britain from the EU.

Commodity assets during the week remained “in the red“. The dollar enjoyed increased demand on the background of the “hawkish” comments by the US Federal Reserve, which exerted pressure on assets denominated in it. Impressive drawdown showed precious metals. Gold (XAU / USD) finished the week at 1,216.49, losing 3.03%. Silver (XAG / USD) fell by 4.04%, falling to 2-week low 15,133. Brent crude oil retreated from its yearly high and finished the week with a total of -2.39%.

Chart of the week:

silver chart

Silver chart

The economic data of the last week:

  • Monday. US: February Chicago PMI -0.29 vs. 0.41 previously
  • Tuesday. UK: February, the CPI + 0.2%, + 0.3% vs. + 0.4%, + 0.3%
  • Wednesday. Nike has published financial statements: EPS $ 0,55 against the forecast of $ 0.49, revenue increased 7.7% to $ 8 billion, which is slightly below the $ 8.2 billion forecast
  • Thursday. UK: February retail sales -0.4%, + 3.8% vs. -0.7%, + 3.8%
  • Friday. US. Q4 GDP revised to increase to 1.4% vs. 1.0%, according to preliminary estimates

Forecast for the week on March 28 – April 1

Stock market

This week the market will very closely follow the US statistics. This is not surprising, taking into account the fact that after the “soft” accompanying statement following the meeting held on March 16 is literally the next week, we hear statements Partick Harker, Charles Evans, Dennis Lockhart, James Bullard and John Williams that Fed should consider a rate hike in April, provided that the economy will show signs of cooling. Given that the US regulator puts the situation in the labor market and inflationary pressures, cause for concern could emerge at the forefront.

The market will follow the report on employment in the private sector from the ADP, as well as data from the Challenger on the job cuts, which will allow to speculate as to what would be the key NFP report, published on Friday, 1 April. Signs of further stabilization in the sector will be able in the short term to cause the fall of the American benchmark as reinforce expectations of tighter Fed monetary policy already at the meeting in April. However, it may return to growth as the strong labor market will indicate stability in the economy, which will have to wait and growth in corporate profits in the future Dow Jones (YM), S & P (ES) and NASDAQ (NQ). The primary objectives are likely to be levels: 17700, 2076.30 and 4480.00, respectively. The only thing that can dampen the spirit of the Federal Reserve – the slowdown in wage growth.

Commodity and raw market

Brent crude oil retreated from its yearly high. At the moment quotes black gold declined to a level of 39.22, but the closure of the week rebounded to the level of 40.42 dollars per barrel. Overall, this suggests that in the area of ​​38.30 – 39.00 USD price form “local bottom” and is unlikely to go away for a long time below this mark. At the current stage of oil prospects are mixed. On the one hand, the market is still looking forward to meeting the major oil-producing countries of the world in which they will have to agree on a freezing of production volumes, despite the fact that a number of countries, said that will not take part in it (in particular, Iran and Libya, are planning to increase the volume). But the fact that Saudi Arabia is ready to take this step, despite the fact that he still will not be completely synchronized, black gold has moderate support.

However, expect to achieve new highs only to those expectations, it is not necessary. Brent will continue to grow only on the condition that the agreement, in fact, be achieved, or if there will be evidence of reducing supply on the world market, for example, in the form of a sharp decline in US production volumes. However, the market continues to receive evidence of the growth of commercial stocks in the US. And if in the environment of the EIA report again reflect their impressive growth, short-term sale of the assets can not be avoided. Thus, we can say that Brent during the next working week will be held within the previously established range of 38.30 – 42.50.

Copper (HG) proved to be on the same wavelength with the Commodity assets, which showed a decline against the strengthening of the US dollar. Although there were additional reasons for the fall in prices. In particular, it is the fact that copper inventories on the Shanghai Stock Exchange reached a record level of 400 thousand. Tonnes, an increase from the beginning of the year by nearly 220 thousand. Tonnes. Such dynamics indicates a relatively low demand in the current phase. If we take into account also the threat of a further slowdown in the Chinese economy, which is the world’s largest consumer of the red metal in the world (about 45%) can be expected, and further reduce prices.

One of the pressures on the metal, may make data on the index of business activity in the industrial sector of China, published on 1 April. Since March 2015 PMI Caixin kept below the 50 level that separates growth of the sector zone by zone recession. If the index deepen the negative territory, it will be another signal to a possible drop in GDP growth of China in the 1st quarter of 2016, which had a negative impact on expectations of demand for copper, which can send the quotes to the level of 2.1450 after breaking the mark 2.1970.

Currency market

The pair USD / JPY next week may continue to grow, which it has demonstrated over the past 6 days. Top quotes couples can push, primarily by optimism the US dollar, provided that the published macroeconomic data will be released optimistic enough to convince markets in the United States the possibility of an early Fed rate increase. Also, do not forget that in Japan, inflationary pressure remains very low (according to the latest data, the core consumer price index in February remained unchanged instead of growth by 0.1%), which creates conditions for the preservation ultrasoft monetary policy national a regulator for a prolonged period of time. If more and Japanese data on household spending, retail sales, unemployment and industrial production will be released below expectations, the couple will receive an additional impetus for growth in the level area of ​​114.60.

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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