IMF Forecasts on Global Slowdown
- 10 June 2019
CURRENCY MARKET OBSERVATIONS – 10 June 2019
Fundamental Outlook Last week, the U.S. President Trump ended his 3-day visit to U.K. and assures that U.S. will cut a very phenomenal trade deal with the U.K. Government. On the other hand, some anonymous sources say U.S. is preparing to make a USD2 billion sale of military weapons to Taiwan, escalating the tension of trade war with China.
President Trump announces a deal has been reached with Mexico while the import tariff supposed to commence on 10 June has been averted. Measure on deterring involuntary immigrants also will be strengthened at the border. On separate case, President Trump says tariff on Chinese imports could raise by another USD300 billon benchmark if necessary.
The American payroll added 75,000 in May and triggered an increased expectation of rate cut in coming FOMC meeting. Unemployment rate at 3.6 percent and unchanged from April. Dow benchmarks closed 260 points higher on Friday followed through the expected rate cut in June.
The U.S. treasury yield curve has turned inverted as the 10Y Bond yield tanks down to 19-month low at below 2.084 percent on Friday. Traders are now forecasting a possible rate cut in June as the inflation wanes and sign of recession surfaces.
China has issued a new whitepaper claiming U.S. to be an untrustworthy negotiator and backtrack on the proposed deal. Beijing Government also warns its citizens from travelling to U.S. country.
Last week, China’s President Xi visited Russia for a 3-day visit and called President Putin as his best friend and colleague. Xi also cited U.S. will remain strong as allied country to China.
The European Central Bank President Mario Draghi pushes backward the possibility of rate hike due to uncertainty of trade war tension and fear of global recession.
IMF forecasts the GDP growth for China will be lowered to 6.2 percent in 2019 from previous year 6.3 percent. Impact of trade war will wipe out USD455 billion on global GDP next year.
Technical Forecast USD/JPY has been trading sideways last week in consolidation. The trend is threading in tight range from 107.50 – 108.50 region while waiting to break in either directional headway. Our next targets will be 106.00 or 109.50 upon breaking beyond the aforementioned range.
EUR/USD surged last week for recovery and closed at 1.1330 on Friday. This week, we forecast the trend will consolidate at 1.1250 area before climbing higher. Temporary target is identified at 1.1400 level in case of continual rise. Dollar index will pay an essential role for leading the inverse direction of Euro.
GBP/USD has been trading in mild recovery after PM May announced her resignation. This week, we reckon the range will be limited from 1.2650 – 1.2800 region while waiting for more fundamental news. The English cabinet is waiting for the electing a new Prime Minister from Conservative Party to replace Theresa May.
Gold prices closed at USD1340 /oz resistance area on Friday. This week, it is very likely to see a surge on upside due to potential Dollar fall. Initial range is expected to be contained from USD1325 – 1350 /oz for yellow metal. Piercing above USD1350 /oz will probably reach higher at USD1380 /oz with many unbelievers caught in shorting position!
WTI Crude prices dipped below USD51 /barrel last week and reversed a little. This week, we predict the trend will be trading in small range from USD50 – USD54 /barrel amid mixed sentiment. No clear direction is seen yet though Dollar is weakening. Breaking beneath USD50 /barrel needs to control your risk before fishing for a lower bottom after mid-June.
Silver prices have moved into recovery by entailing Gold trend. This week, the trend will likely consolidate sideways from USD14.75 – USD15.15 /oz until a new bullish strength returns to market. Piercing above USD15.20 /oz will lead a new uptrend to USD15.60 /oz.
Crude Palm Oil (FCPO) Futures on Bursa Derivatives traded in consolidation last week. Ringgit has strengthened against Dollar as the USD/MYR might fall further in the range 4.12 – 4.17 this week. August19 Futures closed at RM2027 /MT on Friday. This week, we foresee the trend will be supported at RM2000 /MT and likely to make a recovery. Topside resistance will emerge at RM2100 /MT area.
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