Christmas rally failed | 25 Dezembro 2015

Forecast for 21- 25 December:

XAU/USD:

In my opinion, potential of downtrend on gold has not exhausted and within the week we should increase short positions on short-term growth of quotes for two reasons. Firstly, FED raised the interest rate by 0.25% on its meeting on Wednesday, December 16. The event was certainly anticipated, but US dollar continued to strengthen against the opinion of many well-known investment Wall Street banks, which relied on correction of USDX. Growth of quotations of the US currency is a negative factor for the precious metals as the price of gold is denominated in US dollars. Second, three-weeks' sell-off in the oil market contributed to decline of inflation expectations in G-7 economies, which are usually negatively perceived by market participants. Investors use XAU/USD to protect themselves against inflation risks, and if these risks are mitigated, there is no need for such hedging. The last week the meetings of the US Federal Reserve and the Bank of Japan's were held and both entities lowered their estimates of inflation for 2015-2016, which clearly confirms the negative scenarioThis week we should open Sell position with XAU/USD on growth of quotations to 1072/1084 and take profit around 1042.

XPT/USD and XPD/USD:

During the week we should expect development of the flat trend. On the one hand, decision of FED to increase the interest rate by 0.25% supported US dollar and thus contributed to decrease in quotations of industrial metals. Release published the last week on US manufacture production in November disappointed traders by weak data: production volume dropped by 0.6% compared to the previous months. It should be noted that the manufacturing sector has been showing weakness for three months in run. In the first eleven months of the year, negative growth of the US industry was 1.49%, which indicates decline in demand for industrial metals and will put pressure on the exchange. On the other hand, China has been demonstrating an increase in the car production for 4 months in run that will support platinum and palladium, as it makes the car industry demand for basic metals, while China is a №1 player in the global car market. In November the growth rate of car production in China has significantly accelerated This week we should expect flat on XPT/USD within 825 -885 and flat on XPD/USD within 527 - 582.

S&P500:

The coming week will be short, because of Christmas celebration on December 25. In this regard, on Thursday, December 24 the US stock market will experience a low liquidity. In my opinion, this week we expect a gradual decline of the index S&P500. After the FOMC decision to increase the key interest rate, capital started to leave the exchange market to the bond market. Both markets usually compete for investors' funds, thus providing a significant impact on the price of shares. The yield on short-term treasuries shows growth and investors close long positions on the threshold of Christmas. Secondly, the last week the report on the Q3 US balance of payments was published. Due to the strong revaluation of the US dollar in the period 2014-2015, a sharp decline of export has been noted. This factor contributed to decrease of the net income of many US corporations in the current year. In the first nine months of the year, the negative balance of payments amounted to 353.5 bln. US dollars up 23.47% over the same period in 2014 and also the highest level for the last 7 years. The last time high growth of the negative balance of payments was in 2008, when the United States experienced economic crisis. At that time, deficit for the first nine months amounted to 538.1 bln. US dollars. The current figure is by 34.3% less, however, growth rate increases and in the second half of 2016 the US economy could face difficulties. This week we should open Sell position with S&P500 on growth of quotations to 2018/2043 and take profit around 1977.