Forecast for the week April 3rd-7th:
This week gold is likely to get into the hands of bears. Quotes will drop because of gold and US dollar correlation. These two instruments have negative correlation, as traders increase volume of long positions on dollar, gold will have to give ground and drop. After 4-week downside correction, USDX index has finally closed previous week in green zone. USA continues to release positive reports allowing us to count on Fed rate hikes continuation.
On the last day of March Federal Reserve Bank president W. Dudley stated that FED could reduce balance sheet later this year and take a pause in terms of rate raising. W. Dudley also emphasized that another two rate hikes will be reasonable. Considering all the above mentioned, we may conclude that FOMC could raise interest rates on June 14th and September 20th. Short-term market expectations concerning Fed policy are therefore bullish. Trading signals: Sell 1250/1264 and take profit 1231.
This week setup is unclear. On the one hand, investors ignored negative US statistics on oil output increase and oil inventories historical high renewal. We saw strong oil contracts demand around psychological level of $50 per barrel, that allowed bulls to close the previous week with quotes rise by 5.1%. So we may assume that there are many buyers on market and they increase long positions volume during drops. Buyers enter the market because of rumors about OPEC extending oil output reduction agreement on summit (May 25th).
On the other hand, as it was mentioned earlier greenback strengthening may be expected during the week, which will have negative impact on oil price. It is difficult to say what will have bigger influence OPEC summit or US dollar strengthening. Trading signals: flat at 52,00-54,00.
S&P500 futures closed previous week with quotes rise and is likely to repeat it this week too. There are two reasons of uptrend development. First of all, it is US public debt market dynamics. 10-year bonds yield has decreased over the last 3 trading weeks and now is 2.39%. To trigger massive shares sales we need at least 2.65% bonds yield. Shares could be sold at current yield if S&P500 renews historical high.
Second of all, this week we expect positive ISM Non-Manufacturing and Manufacturing reports, and also Non-Farm that will have a positive impact on shares quotes. Positive reports may be expected due to strong CB consumer confidence report which on March reached the highest rate since December 2000. Trading signals: Buy 2360/2341 and take profit 2391.