US Fed expresses possible room for interest rate hike, Brexit delayed until October
Fundamental outlook
THE US Federal Reserve officials in its latest meeting minutes, expressed the possibility of an interest rate hike before year end, should economic conditions improve.
US jobless claims fell to 196,000 for the week ended April 6, the lowest recorded since 1969. President Donald Trump said US would be prepared to launch 5G technology before year-end and will win the 5G race.
China’s trade surplus was at 221 billion renminbi in March, above forecast. Inflation reports showed that consumer prices rose 2.3 per cent on a yearly basis while producer gained 0.4 per cent from a year ago.
European Central Bank president Mario Draghi says recession risk remains low and interest rates will likely stay unchanged until year-end. Draghi also said Trump’s tariff threat is hurting confidence in Europe.
The European Union has granted a delay to the Brexit until October 31, more than what Prime Minister Theresa May and UK lawmakers asked for. Analysts predicted that the pound will rise and UK’s Parliament will expedite the process of reaching an agreement for the departure.
The International Monetary Fund ( IMF) downgraded the world’s growth forecast to 3.3 per cent in 2019 but it will likely rise 3.6 per cent in 2020.
Saudi Aramco’s Bonds offer has attracted a massive US$100 billion placement from global investors. Market analysts predicted that the crude prices could rise to US$70 per barrel in 2019 due to geopolitical risks in Syria and Venezuela, while OPEC and Russia persist in cutting global supply.
Technical forecast
US dollar/Japanese yen settled at 112 on Friday. This week, we reckoned the resistance will emerge at the current region. It will be contained in tight range from 111.50 to 112.50. Otherwise, piercing above 112.50 will lead to 114.
Euro/US dollar was steady at around 1.1250. This week, we expect the bulls to emerge after mid-week and rise to 1.14. An uptrend is not possible if the support at 1.1250 is breached.
British pound/ US dollar narrowed into a flag formation and is ready to extend in either direction. We foresee the trend initially contained from 1.30 to 1.31 but it could surge if it breaks through the topside resistance. The Brexit delay may lift demand for the pound to 1.33.
Gold prices traded in sideways due to the firm dollar. We expect the support will emerge at US$1,280 per ounce (oz) and likely to rebound from this bottom. The trend is expected to move from US$1,280 to US$1,300 per oz for time being. Abandon your long-term expectations if the trend breaches below US$1,280 per oz.
WTI Crude prices failed to pierce above US$65 per barrel last week. The market sentiment may be stagnated for time being and begin to thread in sideways correction. We forecast the trend will trade in narrow range and prone to correction. Overall movement will be contained from US$62 to US$65 per barrel until the trend breaks beyond in either direction. However, we still believe better trend in the second quarter.
Silver prices have retreated to the strong support at US$15 per oz. We reckon the trend may remain but poise to move above US$14.80 per oz. The range is expected to thread from US$14.80 to US$15.30 per oz with recovery anticipated.
Crude Palm Oil (FCPO) futures contract in June closed at RM2,166 per MT. We predict the initial range will hover between RM2,140 to RM2,180 per MT until it breaks out of this region. Technically, we have identified the secondary targets at RM2,100 per MT and RM2,250 per MT.