Markets are drifting in the new year, Antonelli and pessimism

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Last week was POS a sign of panic in the equity markets, the VIX rose to 30. This was reflected in high volatility on the currency market, which strongly felt protective of the currency. The strongest dynamics JPY showed, less severe CHF. Also showed a positive trend EUR. The European currency was supported by news of the compromise found in the issue of the Italian budget. Our expectations for USD/JPY and EUR/USD for the week were met.
New year’s market is “thin” movements in it can be sharp, but not the indicative, and, as a rule, lie within the technical picture. With that understanding, we offer to sell the bounces in USD/JPY, which is quite possible in the recovery attempts of the futures on S&P-500, and to redeem the drawdown in EUR/USD. Driver probable further strengthening of the yen will be devalued the dollar return, the European currency maintains the drop in political risks.

The rate of oil

The oil within the General trend of the flight from risk took by the end of the week before a new bottom. Friday was the expiration of options on Friday on significant volume. Futures positioning is bullish, but a net-long fell to lows of 2015. We believe the sellers, at least, needs to take a pause at current levels around $53…54 per barrel of Brent. After some consolidation may be the final wave of cuts in an attempt to push down $50 a barrel Brent, after which the market will remember, finally, that OPEC+ reduces the prey, and determined to remove the excess supply during the first quarter. But before the reversal of the commodity currencies will remain under pressure. CAD and AUD showed a negative trend last week, and may try to weaken further.

The ruble

The ruble with other currencies weakened last week, but the situation is not yet critical looks. In General, fulfilled our recommendation to get rid of the rubles before the holidays, but did not meet the expectations that the softness, the fed could trigger a slight strengthening of the ruble. Markets took the fed’s decision as insufficiently soft, and continued to fall. However, not everything is so bad for the ruble, as it seems amid the General pessimism.
First, the tax period, and payment of taxes on a thin market to support the ruble immediately before the beginning of the new year. And then, upon the release of the Bank of Russia to the market with interventions against the ruble, the ruble can, paradoxically, be strengthened. Because, first, the intervention will be significantly less than last year, due to the fact that the cost of a barrel of oil, which is tied to their volume greatly reduced.
And secondly, exporters, in particular Rosneft, was holding a currency gain to sell in the new year at a more favorable rate, expecting that the news about the return of the Bank of Russia on the market will have on the exchange rate pressure. Due to these factors, we do not expect the weakness of the ruble in the last week of this year, and the expected attempts of strengthening at the beginning of next year, if the dynamics of oil will not be clearly negative. As before, we suggest to use attempts to strengthen the ruble for the sales, waiting for further trend weakness in the ruble next year.

The stock market

In the markets panic, the S&P 500 broke through the February bottom, aiming for 2400. We believe that the level of 2400 will be punctured, and that the bears will run out of steam, will start a medium-term market recovery. The Russian market remains under pressure as part of a General trend, the RTS went below 1100, but got caught on the November support around 1080 (it is the upper bound of the August consolidation range). Downside risks prevail, but the August lows, probably, this time will stand.
Dmitry Golubovsky
FG “Kalita-Finance”