Neal Bhai Reports ~ The focus this week is on FED Chair Janet Yellen’s testimony before the Committee on Financial Services and Committee on Banking, Housing, and Urban Affairs on the 10th and 11th of February. While the content matter is all the same – Semiannual MonetaryPolicy Report, the Q and A session is what the market will be looking forward to.
The weakening Dollar and equities along with a slew of weaker economicdata releases over the past few weeks are likely to make the FED portray a grim picture of the present situation indicating a further delay in the next rate hike.
The acknowledgment should be positive for precious metals in the short term. Base Metals should have a quiet week as the Lunar New Year begins in China and a good chuck of the market activity is on the sidelines. CrudeOil prices should continue to remain volatile and since the fundamentals have not changed drastically, the trend is likely to remain to the downside.
Though, it is important to note that ongoing reports on talks between OPEC and Non~OPEC countries has been supporting prices and a confirmation on a production cut could push prices higher sharply even though the chances of that happening are remote.
Technically, a strong weekly close above the $1185.0 resistance will call for a short term bottom in Gold with price objectives at $1300.0 going ahead. Technically, Silver looks like a much better buy and we expect prices to rally to $16.15 (Rs.38500.0-39000.0) in the short term.
Base Metals are likely to have thin trading this week as the Chinese markets remain closed for the Lunar New Year. Technically, the outlook is negative and we expect prices to correct lower this week after the rally previously. A negative close today should confirm the retest of Rs.300.0 and possibly levels below in the week ahead.
The outlook on Crude Oil continues to remain negative in the short term due to weakening fundamentals, specifically the US production which has shown no signs of any slowing despite numerous investment cuts, falling oil rigs and prices. WTI should continue to drift lower and take support at previouslows near $29.50 (Rs.2000.0).
A break below this will see continuation of the downside to $25.0 (Rs.1727.0) and possibly $20.0 (Rs.1400.0) this week. While the market is eagerly trying to anticipate a bottom in oil prices, most fail to realize that the actual situation is far more complex than it seems.
Higher prices at the moment would only bring back offline shale supply, all the more because they will be trying to improve their cash flows which basically means – the production will simply increase along with the prices which in turn would pressure prices lower.
Here is the case for oil prices being lower for longer – enough to put a few oil companies out of business. And then again, we always have demand which is being ignored but will eventually play a major role in any sustainable rallies in the oil market.
On the data front, we have a light week ahead except for the FED testimonies. We have Crude Inventories on Wednesday, Jobless Claims and Natural Gas on Thursday followed by Retail Sales figure on Friday. ~ Neal Bhai Reports