Oil: when waiting for the correction. Forecast for the week on May 16 – May 20

By | May 15, 2016

Last week, stocks have not demonstrated the unique dynamics. Five days the majority completed with minor changes. Dow Jones and NASDAQ closed with a loss of 1.1% and 0.24%, respectively. Statistics during the week came out mixed, and comments from the US Federal Reserve were quite aggressive to the market again began to think about a possible rate increase control in June. The German DAX 30 fell 0.31%. Frustration caused quite weak data on the German economy growth rate (1.3% vs. 1.4% in annual terms). The leaders escaped Japanese Nikkey, which added 1.67% to the weakening yen. Outsider made Hong Kong’s HSI, lost 2.09%. The pressure exerted in part expectations that industrial production data from China reflect the slowdown in growth to 6.5% from 6.8% in March.

Publication of quarterly nVidia (NVDA) report allowed the shares to show impressive growth. Quotes jumped by 16.16%, reaching the level of 40.98 dollars. Earnings per share rose from $ 0.24 to $ 0.33, or by 37.5% in annual terms.

In the currency market, the US dollar was again in the display. The US currency was able to strengthen against most opponents. The strongest growth it showed against the yen and the Australian dollar. AUD / USD lost 1,33%, USD / JPY rose 1.24%.

Over the past week, Brent crude oil has strengthened by 5.7% against the background of optimistic forecasts, the IEA, supply problems in Nigeria and the reduction in US stocks according to the EIA. Precious metals finished the week with losses, which was mainly due to the strengthening of the dollar, in which they are denominated. Gold (XAU / USD) has fallen in price by 1.2%. Silver (XAG / USD) fell by 2.17%.

Chart of the week:

nvidia chart

nVidia chart

The economic data of the last week:

  • Monday. Germany March factory orders + 1.9% vs. + 0.7%
  • Tuesday. China April CPI + 2.3% vs. + 2.4%
  • Wednesday. Australia: May consumer confidence from Westpac 8,5% against -4.0% the previous month
  • Thursday. The Bank of England voted unanimously for a constant level of 0.5% rate, calling the British referendum main risk to the economy
  • Friday. US April retail sales + 1.3% vs. + 0.8%

Forecast for the week on May 16 – May 20

Stock market

Published on the last working day of the week data on the index of producer prices and retail sales were mixed, when viewed from the perspective of the US Federal Reserve monetary policy prospects. Inflation at the producer level was lower than expected, which is obviously not conducive to the growth of an early tightening expectations. Let’s see what Tuesday will show data on the consumer price index. Low inflationary pressures will only support the market in the opinion that the increase is not necessary to wait until the end of the year. But retail sales exceeded forecasts (1.3% m / m vs. 0.8% expected). And it shows the stability in the consumer sector. In light of the actions of the US Federal Reserve estimates in June will be very interesting protocol the April meeting.

Especially when you consider that the comments from the regulator recently sounded quite aggressively. Rosengren and George noted that the asset market can be inflated “bubble“, if they are tightened with the tightening. But here it is worth remembering the fact that previously Yellen said that if need be, the Fed may decide on negative rates. Therefore, the tone of the Protocol may shed light on a common position. Aggressive comments may put pressure on the US indices, aiming at their further fall. Dow Jones (YM) in this case may surpass 17530 and target the traffic to 17350. According to NASDAQ (NQ) purpose may be a level of 4195.00. From the point of view of the prospects for economic interest will cause the data on the real estate sector (construction started and the number of permits issued, sales of existing homes), data on industrial production.

Commodity and raw market

London Brent crude oil again failed to gain a foothold above the level of 48.00 dollars per barrel. And, most likely, will soon break above recent highs (48.27) can be expected. Brent for the new wave of growth will require significant catalysts. But over the coming weeks, most likely, nothing interesting happens. Even if the US commercial stocks continue to decline, as well as production volume (which has already fallen to 8.8 million barrels per day), this is unlikely to be enough oil has been able to develop an impressive upward momentum. Thus, any upward movement could become an occasion to profit, and hence falling energy carrier prices. Of course, there is such a factor as supply disruptions in Nigeria, where production fell to the lowest in 22 years. But it negate the news from Canada, where the oil-producing enterprises gradually resume work. Thus, it can be assumed with high probability that Brent did not break out of the range of 43.00 – 48.00 during the week.

Currency market

The coming week may again be troubled for AUD / USD. For publication planned some interesting reports. The first thing you should pay attention – Minutes of the last meeting of the Reserve Bank of Australia. Recall, the regulator it lowered the rate to 1.75%. If made in it assessment of the economic outlook will be rather pessimistic, the Aussie could come under pressure as fears intensify further easing of monetary policy. Recall that earlier published data on consumer inflation expectations showed a drop of 3.6% to 3.2%. In addition, data will be published on the labor market. Rising unemployment, coupled with signs of insufficiently rapid growth of wages (wage index will be published on Wednesday, May 18) for the pair may be an alarming signal for the Australian dollar. Since this factor was one of the bases of rate cut. In the case of negative statistics with AUD / USD may continue to decline with the primary purpose at the level of 0.7160.

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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