The forecast for the week July 24 through July 28:
Gold closed the previous week with a confident rise, however now this tendency may stop. High risk appetite of investors is to blame. American stock market trades at its historical high, and earnings season has just started. There are still many earning reports ahead, so psychological level of S&P500 at 2500 is likely to be tested – for this reason gold will be under pressure, as there is inverse relationship between gold and shares. However, now I don't expect gold to sharply fall since it is supported by declining US dollar. According to CFTC number of speculative net positions on gold remained virtually unchanged the previous week, despite of the two-week quotes growth. Trading signals: Sell 1255/1265 and take profit 1239.
This week oil market is likely to see uptrend. US petroleum inventories are declining, although investors had expected far smaller reduction. Oil products demand is now high all around the world as evidenced by business activity growth in manufacturing sector G-10. It's impossible to avoid sharp greenback fall. US dollar and oil have inverse relation, and given that USDX is now at the lowest level for the last year, bulls have a very strong signal on oil. The latest CFTC report has shown sharp rise of oil speculative net positions. Positions volume has increased from 3 thousand to 38.5 thousand contracts, which also confirms strong interest in oil buying. Trading signals: Buy 48,30/47,52 and take profit 50,00.
This week testing of psychological level at 2500 is highly likely for three reasons. Firstly, we are observing fall of Treasury bonds yield in debt market, which will have a positive impact on stock market. During the last two trading weeks 10-year Treasury bonds yield have fallen by 0.12%. Secondly, the start of US earnings season was obviously a success - around 69% of companies reporting last week showed revenue and net profit growth. Investors are actively ramping up long positions on shares, that pushes the index to the upside. Thirdly, on Friday, July 28 US GDP report for the second quarter of 2017 (advanced estimate) will be released, the report is likely to please traders with positive data. Growth of PMI ISM manufacturing and Non-Manufacturing indexes allows to expect increasing economic growth in USA. Fourthly, speculative net positions dynamics on CME exchange also confirms uptrend: positions volume has increased 1.6 times to 23.8 thousand contracts. Trading signals: Buy 2467/2450 and take profit 2500.