Yesterday, European markets declined moderately within cautious consolidating trading. US markets closed in the red as well. The markets consolidated in anticipation of the main week event – US president’s inauguration and his speech during which there were significant sales in many sectors amid of uncertainty about the presidential administration and its course of action. Today, on Friday, we will see the outcome, and in the days to come, the market will setup the main trading direction and sentiment for coming months.
Today, the European investors could form a positive mood after mixed start of the trading session. Results of yesterday's ECB meeting support European sentiment, as well as locally weaker Euro. However, trading is still in anticipation of Donald Trump’s inauguration, and his press-conference. Investors expect to hear the details of his economic policy. US futures indices traded in neutral.
The oil market remains under pressure. As we expected the IEA report was not very positive, and US data on crude inventories failed to support the oil market. However the medium-term demand zone and the lower level of the medium-term channel (Brent $ 54.20- $ 56.70) looks stable. We expect oil to rebound from these levels as early as next week. This weekend OPEC representatives’ meeting can, hopefully, regain a positive sentiment for this market that will attract mid-term speculative capital back in oil longs. We expect Brent crude oil futures to return to the area of $ 55.30- $ 55.50.
This week’s trading can be described as extremely volatile, amid conflicting news data and market factors. Yesterday's meeting of the ECB confirmed the supportive policy of European regulator, as ECB head continues to hold dovish position, and inflation risks are not of concern to the European officials. Amid this background, there were sales in Euro as medium-term weakness of the European currency strengthened. In the current situation, we do not expect that Eur / Usd will be able to go higher above the significant level of 1.0705 (38.2 Fibonacci extension). At the same time, a risk of sharp interest rate hikes decreased in the US after J. Yellen’s statement about a smooth course of rate increase. Meanwhile, this week’s new risk factor has appeared. This could have a significant pressure on the oil markets and commodities as whole. There are risks of global trade’s slowing amid increasing tension between China and the United States in a free trade fields.