Yen recovers, Japan might exit negative rates

Fundamental outlook

A member of the Bank of Japan’s policy board Takata Hajime called for an overhaul of ultra-loose monetary policy that might lead to an exit from negative interest rates and bond yield control. The US dollar-Japanese yen market fell from 150 to 147 on Friday as the yen recovered.

US payrolls rose 275,000 in February, better than forecast. Unemployment rate moved higher to 3.9 per cent. On Friday, Nasdaq benchmark fell one per cent from an all-time-high of 16,449. Nvidia stock tumbled as the market corrected itself.

Federal Reserve chairman Jerome Powell said the days of rate cut is not too far if the inflation can be contained. Dollar Index (USDX) fell from 103.70 to 102.50 over the past few days. Commodities like precious metals and oil have begun to rise.

China inflation rose 0.7 per cent on an annual basis in February, returning to positive growth for the first time after submerging into negative region for the past four months. Producer prices dove deeper to minus 2.7 per cent from a year ago and has been down in negative numbers since April 2022.

European Central Bank kept its interest rate policy unchanged and its inflation outlook appears softer, triggering a possible rate cut in June. The euro gained against the dollar as traders expect the Federal Reserve will trim rates faster than European Central Bank.

Technical forecast

US dollar/Japanese yen fell last week after the comments by BoJ’s policymaker which favoured a change of direction in monetary policy. We forecast the unwinding might continue and the market range might be lower at 144. Topside resistance will likely stay at 148 in case of a technical recovery.

Euro/US dollar broke above 1.0850 resistance last week as the dollar weakened. The market is prone to stay resilient and thread within 1.0850 to 1.10. We predict many short-coverings will emerge in the market once the trend comes down below 1.088. Caution is reminded.

British pound/US dollar pierced above 1.28 resistance unexpectedly last week and turned bullish. We expect the market might tease the 1.28 area but will be well supported here. The range is expected to move higher from 1.28 to 1.30 until the end of the week. Short traders need to be cautious in managing losses.

Gold prices broke above US$100 per ounce range last week. The market saw a new bullish trend after the technical pattern pierced above US$2,100 per ounce. We reckoned the market might reach US$2,200 per ounce before moving into a correction. The range trading is expected at US$2,140 to US$2,200 per ounce as profittaking is expected to occur.

WTI Crude prices failed to cross above US$80 per barrel last week and reversed down to US$78 per barrel on Friday. We expect the market to thread in tight range within US$77 to US$80 per barrel as the dollar waned. Buying interest is likely to enter the market unless the trend sinks beneath US$77 per barrel.

Silver prices pierced above US$23.50 per ounce last week and reached US$24.50 per ounce. We foresee the market might move into a correction and trade within US$23.50 to US$24.50 per ounce. Mixed sentiment is expected to emerge as the trend might saturate for the time being.

Crude Palm Oil (FCPO) Futures on Bursa Derivatives gained higher last week due to a production cut driven by the current weather condition. May 2024 Futures settled at RM4,089 per metric tonne on Friday. The market is prone to climb higher as we target RM4,025 per metric tonne. The bulls have pierced above RM4,040 per metric tonne resistance and might turn this level into a good support this week. The day-chart saw a clear upward pattern and it might ascend in the coming weeks.