Sell positions for all the instruments | 03 June 2016

The forecast for the week May 30 一 June 3:

XAU/USD:

The last four weeks gold has finished trading in the "red zone", which indicates presence of strong sellers. In my view, the downtrend will continue this week, and we will see a test of the psychological level $1,200 per ounce. There are two factors, which point continuation of the bearish trend. Firstly, it is strengthening of the US currency. This week the main event of the day will be the May report on labor market and I expect it to be positive. April's report say that pace economic growth is gaining momentum. in May, consumer confidence indicator by the University of Michigan has reached its highest level for the year, which also confirms the uptrend. Non-Farm payrolls are expected above the level of 200 thousand. That will enhance expectations regarding raise of the US Fed interest rate. These expectations will boost USDX basket index that usually has a negative impact on cost of the precious metal. Secondly, the low inflation expectations in the euro area and Japan also play into the hands of bears, because there is no need to hedge inflation risks. Even surge of the energy price over the past four months was not able to accelerate inflation in the G-7 countries.This week we shall open Sell positions on growth of quotations to 1225/1240 and take profit at 1195.

Brent:

In my view, oil can show a downward movement either correction to $ 47/barrel or drop to $39 in the middle run. Now we will consider the first scenario. For what reasons can the oil drop? Driver of the downtrend will be US dollar. Investors are now optimistic about outlook for the US economy as a whole as well as the national currency in particular. This factor, in turn, puts the black gold under pressure, because energy price is denominated in US currency. The seasonal factor also matters here, as in the first quarter US GDP was weaker and it had accelerated in the second and third quarters. Strong economic data in April confirms this trend. Brent rose by 6.22% and USDX Dollar Index lost 4.22% in the first quarter of 2016. Now, in my opinion, we should expect the reverse trend: oil will decline and USD will get stronger. A little more than a month remains till the end of the second quarter. In addition, for two weeks in a row the oil can not consolidate above the psychological level $50/barrel, which indicates doubs of market players regarding the future growth. However, this does cancel growth. Now we are talking about correction to $ 47/barrel, and then the time will come to revise the forecast. This week we shall open Sell positions on growth of quotations to 50.10/51.50 and take profit at 47.00.

S&P500:

In my opinion, investors decided to drive up quotations on the US stock market in order to arrange a mass sale of assets. If you are an investor with a large portfolio, then get out of a position. You need a supportive environment, where everyone wants to buy shares even at high levels. The fundamental background for the stock market is negative. Yield of treasuries is rising against expectations of tightening of the monetary policy by FOMC. In her Friday's speech at Harvard University Janet Yellen said that "in case of further improvement in the economy and the labor market," there will be a sense to "raise the interest rate gradually and carefully." Almost all key indicators for April were positive. This Friday we will receive labor market release for May. In my opinion, we can expect positive data as the US economy begins to show an accelerated growth. Growth of sales of real estate and cars is the best proof of that. If the labor market declines, consumers immediately refuse to make expensive purchases. Now we see a completely different trend. Thus, the strong labor market data forced investors to settle in profit on the stock market and switch to the bond market, where they will have a better profitability. This week we shall open Sell positions on growth of quotations to 2100/2120 and take profit at 2065.