Oil Trades in Red Zone | 31 March 2017

Forecast for the week from March 27th to 31st:

XAU/USD:

This weak is unfortunate for gold, First of all, dollar strengthening is expected due to USDX current levels appeal for investors. Keep in mind US housing report on primary market: sales rate has reached 7-month high increasing by 12,7% per annum against 6% in January. The rise indicates increased public welfare which has a positive impact on GDP rise. And as always increased US dollar demand has a negative impact on gold quotes. Second of all, at the end of March increase of America stock market is expected, which may put additional pressure on gold as a safety asset. Trading signal: Sell 1255/1270 and take profit 1232.

Brent:

In the first half of the week oil quotes drop is likely to occur because of negative US statistics. Oil inventories in US are at their historical high now and Friday Baker Hughes release shows that American companies are still ramping up oil output. Number of horizontal drilling platforms has increased by 15 units in a week, and number of vertical platforms by 8. In total there are 652 working platforms in USA now, that is the highest since September 11th 2015. Considering this, we expect renewal of historical high of oil output in US. That'll make Brent to test March 22th low (49,91). After that corrective rollback to the upside to 51,00 region is possible, as market is full of rumors of OPEC extending oil production cut on the next cartel summit on May 25th in Vien. According to CFTC large speculators have again increased futures contracts sales by 15.3 thousand. Futures sales are going on over the last 4 weeks in a row confirming bearish trend. Trading signals: Sell 50,69/52,21 and take profit 49,85.

S&P500:

During this week moderate increase in quotes may be expected for two reasons. First of all, this Tuesday may see positive March Conference Board consumer confidence report, as University of Michigan reported increase in similar index in the first spring month. Positive dynamics has been observed against the background of rising wages and decreasing unemployment rate. Second of all, 10-year Treasury bonds yield, which has negative correlation with Broad Market Index, is decreasing two weeks in a row. That's a positive factor for shares. Current market P/E ratio is 33.6, along with market bonds yield of 2.97% it indicates strong stock market overheating and coming correction. Now government bonds yield is 2.4% which gives S&P500 potential for growing. Trading signals: Buy 2335/2315 and take profit 2365.