US, UK policymakers raise interest rates
THE US Federal Reserve raised its benchmark rate by 50 basis points for the first time in two decades. Policymakers plan to reduce the monthly asset purchase programme by US$95 billion soon and cut down the US$9 trillion balance sheet. Chairman Jerome Powell said that the committee is not planning for a larger scale hike in near future.
The Bank of England also raised its benchmark rate by 25 basis points to one per cent, the highest level in 13 years. The annual inflation rose to seven per cent in March, the highest in 30 years. Policymakers expect inflation rates to reach 10 per cent towards the end of the year due to the UkraineRussia conflict and prolonged lockdown in China.
Soon after the Bank of England announced the rate hike, European and US markets tumbled during Thursday’s trading session. The market became jittery on Friday and most Asian markets fell before the weekend.
US non-farm payroll gained 428,000 in April, beating forecast. The unemployment rate held steady at 3.6 per cent. Traders fear of more pressure on rate hike as the job growth increases.
Technical forecast
US dollar/JPY closed above 130.00 for the weekend. This week, it will be very speculative for the market to climb higher or wane. Technically, we project the range to stay within 128.00 – 132.00 region. Traders need to be cautious in case the trend breaks beyond this aforementioned range.
EUR/US dollar revolves around 1.0500 level that is very crucial for a potential makeor-break pattern. By nature, European policymakers have always intervened at this region in the past to protect the euro value.
This week, we shall foresee the trend to be contained from 1.0400 – 1.0600 with a huge potential to swing upward. Sinking beneath 1.0400 support will be disastrous for the whole euro bloc economy.
GBP/US dollar sank to 1.2350 last week that was last seen in June 2020 during the pandemic outbreak. This week, we predict the bears will continue to wane and test 1.2000 benchmark. Long traders need to be prepared for the undesired situation while resistance will emerge at 1.2600 level in case of recovery.
WTI Crude prices stood firm at US$100 per barrel support as we predicted last week. We target the range could climb slightly higher within US$105 to US$115 per barrel due to the escalating Ukraine-Russia conflict. Falling beneath US$105 per barrel could lead to the next stronger demand level at US$100 per barrel.
Crude Palm Oil (FCPO) Futures on Bursa Derivatives traded only two days amid the long holidays last week. The market fell due to profit-taking and waning demand. July 2022 Futures contract settled at RM6,406 per metric tonne on Friday. Market prices will likely fall to test RM6,200 per metric tonne before bargain-hunting emerges. The upside resistance is identified at RM6,800 per metric tonne in case of a technical recovery.
Gold prices have been holding well above US$1,850 per ounce but limited beneath US$1,900 per ounce. We reckoned the market movement will remain unchanged within this range but might stage a whipsaw movement. Traders are still observing the dollar’s direction to gauge precious metals’ prices.
Silver prices stayed beneath US$23 per ounce last week. The market demand is weak but will likely be supported at US$22 per ounce. We target a narrow trading range this week from US$22 to US$23 per ounce. Bargain-hunters will likely wait beneath US$22 per ounce.