Three reasons to sell Brent | 01 July 2016

The forecast for the week June 27 - July 1:

XAU/USD:

Panic in the financial markets is the perfect environment for the precious metal. Historically, gold is regarded by investors as a safe asset. When all markets are in storm, everybody chooses this "safe haven." In this regard, after the correction is necessary to build up short positions, as investors are concerned because of uncertainty around the European and British economy. S&P 500 VIX fear index rose by 49.33% on Friday, June 24 thus indicating panic on the financial markets. Outflow of the capital from risky assets will now be the main driver for quotations of the "yellow metal". However, strengthening of the US currency will restrain bulls and in this regard, it is difficult to count on s strong growth of gold. This week we should open Buy positions on drop of quotations to 1310/1285 and take profit at 1345.

Brent:

The last two trading weeks, "black gold" has been closing in the "red zone" and thus we should expect a continued downtrend. Firstly, Brexit forced investors to sell riskier assets including oil. Secondly, at the end of last week USDX dollar index rose by 1.36%, and this is the maximum weekly gain of this year. Strengthening of US dollar will have a negative impact on the price of energy, as cost of raw materials is denominated in US currency. Thirdly, in spite of the driving season in the United States, when crude oil reserves heavily drop, the Department of Energy reports a moderate reduction of stocks. The last Friday, oil service company Baker Hughes reported about a decreased number of drilling rigs in the United States by 7 units and increased number of drilling rigs in Canada by 8 units. Canadian oil companies had been actively expanding production capacity in the last month, and apparently US colleagues will join them. This week should open Sell positions on growth of quotations to ​​49.00 / 50.50 and take profit at 47.30.

S&P500:

Brexit took place, which scared investors and they began to get rid of shares worldwide. The financial sector was the obvious outsider on all the world's leading exchanges. At the end of last week, the fear index S&P500 VIX rose by 32.7% to 25.76. Reversal of the index may take place around 32.09 - the highest level of this year. Many traders may get an idea that response to Brexit has already been put in quotations and that drop may continue only in European stock markets, whereas the US stock market will live its life and current low levels are attractive for purchases. In my view, this assumption is not true, because the stock market as well as the global economy is strongly globalized and in this regard, the problem on the same continent quickly cover the whole world. This week will not be rich in terms of important macroeconomic statistics. We can only highlight the report on business activity in the manufacturing sector from the ISM. This indicator reached the "bottom" in the first quarter and now demonstrates a moderately positive trend. Growth of quotations of commodities, which has been observed in the last five months, helps to increase the production capacity in the energy sector, which should also have a positive impact on sentiment of purchase managers. Thus, during the week should expect decline of quotations, and on Friday, we may see some pullback as investors will settle profit on shorts after release of ISM report. This week should open Sell positions on growth of quotations to 2045/2070 and take profit at 2005.