We shall buy Brent | 07 July 2017

The forecast for the week 3 – 7 July:

XAU/USD:

In the first week of the month, gold can show growth. The main reason is a notable drop of cost of US dollar. We know about phase opposition of gold and US dollar. On drop of US currency we can expect an uptrend on gold. The index of US dollar basket is now on its 7 months' lowest level. Investors are expecting economic slowdown and, as a result, indisposition of the Fed Reserve to raise the rate in the second half of the year. Core PCE Price Index is closely monitored by the Fed's to indicate inflation trend and it dropped to its Low since November 2015. Such dynamics makes raising of the rate unreasonable, because it can discourage business activity even more. Trading recommendation: Buy at 1234/1221 and take profit at 1255.

Brent:

The last week oil added 6,8%. Such growth had not been recorded within the last 5 weeks. What does it prove: reversal of the downtrend or a short-term correction. I am in favor of reversal. First, the currency market shows drop of US dollar and usually that adds to cost of oil. Then, the last week US oil production dropped by 100 000 barrels, which is the Low of the last 2 months. More over, the oil service company Baker Hughes reported about drop of drilling rigs by 2 in the USA – after 34 weeks, when this number had been growing. Of course, the sole week is not enough to make conclusions but there is the first signal: with current oil prices (under 50$/ per barrel), US oil producers have reached the maximum capacity – 756 drilling rigs. Trading recommendation: Buy 48,15/47,22 and take profit 50.00.

S&P500:

The first week of the month will consist of 4 days, because July 4 is the national holiday in the USA. On this background we can expect flat within the first half of the week. Investors will not be enthusiastic when it comes to new positions. The main event of the week will be release on labor market. Only publication of employment data in the service sector (On Thursday July 4) will shed the light on the coming Non-Farm report. I believe that the data above 200 000 will encourage US exchange. Now economists of Wall Street investment banks have reached consensus forecast: growth of employment by 175 000. Trading recommendation: flat 24150 -2455.