Downward correction of oil is not far away. Forecast for the week on May 30 – June 3

By | May 29, 2016

Stock indices finished the week in the “green“. Part of the support it has provided growth in commodity markets, although there were personal factors. In particular, US benchmarks optimistic about the revision to increase GDP per 1st quarter, Despite the fact that it is fraught with the earlier rate increase. In fact, this was confirmed by Janet Yellen. The Fed chief noted that the economic situation continues to improve and, if the labor market continues to show growth, it will be possible to continue to gradually raise rates. At the end of the week Dow Jones rose by 2.16%. NASDAQ added 3.44%. The German DAX 30 rose by 3.98% largely due to the fall in the euro. Hong Kong’s HSI was also able to show growth of 2.1%.

Brent crude oil still managed to finish the week above $ 50.00, to close at 50.10 dollars per barrel. As a result, an increase of 2.68%. Precious metals finished the week with losses. A key factor of pressure were changed expectations on monetary policy the US Federal Reserve, supported by a sufficiently strong US statistics. Gold (XAU / USD) fell by 3.17%, noting a 3-month low. Silver (XAG / USD) fell by 1.83%.

Chart of the week:

Gold chart

Gold chart

The economic data of the last week:

  • Monday. Eurozone: May composite PMI 52,9 against the forecast of 53.2
  • Tuesday. US: April, the volume of home sales in the primary market of 16.6% vs. 2.0%
  • Wednesday. The Bank of Canada decided to leave rates unchanged at 0.5%
  • Thursday. United Kingdom: Q1 GDP 2.0% vs. 2.1%
  • Friday. US. Q1 GDP 0.8% vs. 0.9%, and a preliminary assessment of 0.5%

Forecast for the week on May 30 – June 3

Stock market

This week the market stock indices to be another test of strength. We are talking about the US labor market data. This will be the last report on this sector of the US economy in the run-up to the June meeting of the US Federal Reserve. Recent comments from Fed made it clear that the regulator may increase the rate already at a meeting in June or July. In this case, the probability of a July increase, according to data of the futures positions on the rate of 53.2%. If the number of new jobs created outside the agricultural economic sector exceeded the forecast at the level of 170 thousand, And hourly wages continue to rise, signaling a strengthening of inflation at this level, expectations of tightening are likely to worsen.

Moreover, the pace of US economic growth in the 1st quarter was revised up to 0.8% in annual terms by 0.5% according to preliminary estimates. Therefore, the market, at least, will be put on a fairly aggressive rhetoric by the Fed. In this situation, after the short-term growth, caused by expectations of improving the state of the US economy, US indices could come under pressure. Dow Jones (YM) can in this case may fall back to the level in the area of ​​4390.0 17530 NASDAQ (NQ). But even before the release of the key during the week attention is paid to the data on the index of business activity in the industrial sector, a similar report on the service sector, as well as data on employment in the private sector from the ADP, which are often seen as a preliminary indicator.

Commodity and raw market

Brent crude oil noted high at 50.95 last week, but failed to hold on achieved energy sources. At the same time, it is possible that in the coming week the oil will continue downward correction. A key event will be the OPEC meeting scheduled for June 2nd. It is unlikely that this summit will present any surprises. In the rhetoric of the representatives of a number of countries (Saudi Arabia, Iran), it becomes clear that they are not willing to lower quotas. On the contrary, in the current environment, the fight for market share intensifies. Consequently, about any decline in production, which could lead to an acceleration of the process of achieving a balance of demand and supply of energy to world markets, can be no question. Therefore, as soon as there will be such a negative, albeit expected, the results of the meeting, of Brent will be able to speed up the fall. The primary objective will be the level of 48.20 dollars per barrel, and in the case of its breakthrough will be glad to decrease to 47.00.

Next week will be published data on the index of business activity in the industrial sector of China. As is known, the Celestial Empire is one of the largest consumers of copper in the world. Record with March 2015 can not be fixed above the watershed of 50, indicating that the ongoing downturn in the industry. If the figures will signal a further slowdown in the industrial sector of China, Copper (HG) may be under pressure. The primary goal of the fall may be the level of 2.0660.

Currency market

Recently, the Australian dollar does not feel the best way. Active reduction Aussie started after the Reserve Bank of Australia lowered the rate. This week attention is paid to the data on the rate of national economic growth in the 1st quarter of 2016. It is expected that in annual terms, it will slow down to 2.7% from 3.0% previously. In general, even numbers in line with expectations may prove to market comments recall the last head of the Reserve Bank of Australia that the current inflation expectations allow the regulator to adhere to the soft attitude of monetary policy. Added to this is not the best state of the labor market, where job growth has been driven by an increase in the number of employees with part-time and get a chance to increase the rate cut already in one of the next meetings. If more and statistics from the US will not disappoint, then the breakout below 0,7160 AUD / USD pair has a chance to fall to the level of 0.7060 with a further target at 0.7000.

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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