Forecast for the week from January 23 to January 27th:
Over the last four weeks gold has closed the sessions with increase in quotes, and I believe, it is time for technical downside correction. I would like to turn your attention to two factors that might have a strong pressure on gold quotes. First of all, this week there is going to be US GDP release for the 4 quarter of 2016. I am expecting positive data, as during the reported period there was recorded an increase in consumer spending, growth of business activity in manufacturing and services, according to ISM. Optimistic data from US will support dollar facing 1 February US Fed meeting. This week will see many corporate reports of US companies and we are likely to see continuation of positive trend. Stock market growth always has a negative impact on gold as safe asset. Trading recommendation: Sell 1210/1220 and take profit 1177.
Negative situation is expected for this week. As noted earlier, during this week strengthening of US Dollar may be expected. This is a negative factor for oil, as oil is quoted in terms of US currency. Since dollar index is traded above level of 100 for the last six trading weeks, it would be hard for oil to reach significant highs. It is also important to mention Friday Baker Hughes release which indicates increase in production capacity in North America. In USA number of drilling platforms increased by 41, in Canada by 59. That is the highest number since December 4th, 2015 and February 20th 2015 respectively. The number of vertical drilling platforms in US increased again. These platforms are the most effective in oil output. Investors are likely to react negatively on increasing oil supply. Trading recommendation: Sell 56,00/57,50 and take profit 54,25.
Since December 13th, 2016 broad market index stays within 2235,1 - 2282,4 range. I believe, this week we may see index to move up and set new historical high. This is realistic, first of all, considering ISM PMI Non-Manufacturing and Manufacturing indices uptrend one may expect positive GDP data release for 4th quarter. Traders will welcome that. First two weeks of corporate reporting season were quite positive: 75% of companies' indicators were better than average forecasts. From all the published releases we would like to underline the two largest American banks releases: Morgan Stanley's revenue and net income increases the expectations of market participants by 8,93% and 24,6%, and Goldman Sachs's revenue and net income increases the expectations by 9% and 5.4% respectively. Both banks are traded below the average P/BV indicator. This suggests growth potential of 2% from current levels. Continuation of positive dynamics is highly likely, this will allow the index to set new highs. Trading recommendation: Buy 2272/2252 and take profit 2293.