US Fed cuts Fed funds rate
Fundamental outlook
THE US Federal Reserve cut a quarter-point in Fed funds rate and lowered it to a target range of 1.75 per cent to two per cent. Chairman Jerome Powell explained that policymakers are to ensure maximal employment and stable prices in the economy, while the rate cut has been criticised by President Donald Trump for being insufficient.
Trump said the US reached initial trade agreements with Japan on tariff barriers and digital trade that will not require congressional approval.
On Friday, Chinese negotiators finished trade talks in Washington but cut short on their scheduled trip, bypassing a visit to US farmers. Unlike the comment made last week on making an interim deal, Trump said he does not need a deal with China before his 2020 election. The Dow market fell and closed 159 points lower on Friday.
The Bank of England held interest rate unchanged at 0.75 per cent. Policymakers cite a further delay in Brexit will lead to an economic risk of a slowdown. Prime Minister Borris Johnson vowed to execute the departure from the European Union.
Following the sabotage attack on Saudi's Aramco oilfield asset, the US is now the largest oil producer in the world. A Saudi spokesman said the oil output will be fully restored by the end of September and the planned IPO is not expected to be affected.
Saudi defence ministry claimed the debris of 25 drones and missiles suggest the work of Iran. Trump ordered the highest sanction on the Central Bank of Iran.
Technical forecast
US dollar/Japanese yen topped 108.50 last week and traded lower. We forecast the trend will be prone to fall a little. But it could consolidate into a sideways trend. Price movement is expected to be contained from 106.50 108.50 while traders adjust their mixed positions.
Euro/US dollar is stuck in a tight range from the strong dollar. We retain our view on the range from 1.10 to1.11 with a potential to break out in either direction. Traders are advised to stay prudent in case of the adversity against your interest.
British pound/US dollar traded higher from 1.24 bottoms last week. Market adopted optimism in the Brexit issue but it could be short-lived. We reckon the trend will be prone to thread sideways while remain contained within 1.2350 to 1.2550. The market momentum is still slightly firm and might float for few more weeks until the Brexit occurs. Traders are reminded to stay cautious in adopting long-term positions.
WTI Crude prices spiked more than 14 per cent on last Monday to US$63 per barrel after news of the sabotage on Saudi oil asset. The market settled on US$58 per barrel on Friday. We forecast the trend to trade from US$57 to US$62 per barrel with bargain-hunting at the aforementioned base.
Crude Palm Oil (FCPO) Futures on Bursa Derivatives opened high at RM2,297 per MT on last Monday but fell, following most edible oil trend. December Futures contract closed at RM2,224 per MT on Friday. We reckoned the trend will fall further to RM2,180 per MT level. With immediate resistance at RM2,240 per MT level, another possibility is to break above this level and trade within the range of RM2240 to RM2,280 per MT.
Gold prices traded sideways with a small spike on Friday due to the falling Dow. We have identified the resistance at US$1,520 per ounce that needs to be pierced for firm settlement before the trend picks up again. Otherwise, we target the range may trade lower this week inside US$1,490 to US$1,520 per ounce. In the current situation, the crude has become a very crucial catalyst for traders in seeking an alternate choice.
Silver prices traded in a narrow range from US$17.50 to US$18 per ounce last week. We predict the trend will stay unchanged until it breaks out in either direction. Silver prices are coupled with gold and will be trailing each together as a temporarily alternate to crude prices.