Federal Reserve Cuts 25 BP in Rate
- 5 August 2019
CURRENCY MARKET OBSERVATIONS – 5 Aug 2019
Fundamental Outlook The U.S. and Chinese trade representatives met in Shanghai last week for discussion. No deal has been reached and next meeting is scheduled in September. President Trump tweets in criticism that China is not purchasing American agricultural products.
After the trade talk, President Trump announced 10 percent as new tariff to be imposed on Chinese imports worth USD300 billion in coming September. China has pledged to retaliate the U.S. tariffs. Stocks and Crude prices fell.
The U.S. Federal Reserve cuts 25bp in FED fund rate but chairman Powell stresses that this is not the beginning of easing regime. Dow markets fell after mid-week as Bond yield slid.
Last Wednesday, North Korea fired new ballistic missiles test in Asia morning hours. President Trump comments in playing own the event. On the other hand, Trump administration ends Reagan-era nuclear missile pact with Russia causing a commotion in European Union.
The U.S. manufacturing index fell to 51.2 in July while construction spending down 1.3 percent in June. China’s manufacturing index grew 49.7 in July but below 50.0 benchmark. On the other hand, Samsung Electronic says its profit in Q2 seasons fell 56% from a year ago.
Technical Forecast USD/JPY has begun a new slide as Dollar recedes. This week, we foresee the trend will be resilient at 107.50 region in case of fast retracement. Overall range is expected to dive deeper with target lying at 105.50 level. Short positions are better to be planned from topside retracement.
EUR/USD is hovering at 1.1100 region that is the current support. This week, the trend will be ambiguous and might go in either direction. In our opinion, dividing below 1.1050 will initiate a new selling forces in case of Dollar recovery. However, rising above 1.1150 level could drive the trend higher in reaching 1.1400 target.
GBP/USD has been a bad performer since Boris Johnson became the Prime Minister. This week, we reckon the trend might fall deeper till the bargain-hunting emerges at 1.2000 area. Overall range is expected to be contained from 1.2000 – 1.2200 region.
Gold prices have been threading inside large range from USD1400 – USD1450 /oz last week due to uncertainty after rate cut. Traders reckon the rate cut may be positive to drive the yellow metal higher but FED chair Powell hints this is not the beginning of an easing regime. This week, we forecast the trend will remain unchanged but spiking up and settlement above USD1450 /oz could be a new bullish sign to USD1490 /oz.
WTI Crude prices fell and took a dip below USD54 /barrel after U.S. announced new trade war on Chinese goods. This week, we foresee the potential fall in Dollar trend will only spike Gold or WTI in recovery. Hence, WTI prices are still uncertain that may fall below USD54 /barrel to test USD51 /barrel level; else recovery above USD57 /barrel will make its debut to USD60 /barrel again!
Silver prices traded in sideways from USD16.00 – USD16.50 /oz last week. Market activity is in a mixed sentiment as traders adjust their positions. This week, we expect not much change in the range movement unless the prices extend beyond the aforementioned range. More attention will be watched over Gold prices.
Crude Palm Oil (FCPO) Futures on Bursa Derivatives traded in small range amid uncertainty. Traders October19 Futures closed at RM2061 /MT on Friday. This week, we forecast the range will be contained from RM2040 – RM2080 /MT while traders will remain cautious in interpreting currency movement and regional economic development. Technically, braking beyond the aforementioned range will initiate a new directional trend.
DAR Wong has 30 years of trading and hedging experiences in global financial markets. The opinion is solely at his own. He can be reached at firstname.lastname@example.org