Daily Market Lookup

• Asian shares scaled two-year highs on Thursday while the dollar and U.S. bond yields slipped after the U.S. Federal Reserve signaled a cautious approach to future rate hikes and the reduction of its $4.5 trillion of bond holdings. Minutes from the Fed's last policy meeting showed policymakers agreed they should hold off on raising interest rates until it was clear a recent U.S. economic slowdown was temporary, though most said a hike was coming soon. The minutes also showed that policymakers favored a gradual reduction in its massive balance sheet. Fed staff proposed that the central bank set a cap on the amount of bonds that would be allowed to run off each month, initially setting it at a low level and raising it every three months. Chicago Federal Reserve President Charles Evans signaled a cautious stance toward further U.S. interest-rate increases in remarks prepared for delivery on Thursday in Tokyo, saying that below-target U.S. inflation is "a serious policy outcome miss." While the U.S. economy, now at 4.4 percent unemployment, has returned to "essentially" full employment, inflation has run below the Fed's 2-percent target for a full eight years, Evans told a conference sponsored by the Bank of Japan and the Institute for Monetary and Economic Studies. Evans did not lay out exactly how that effort should translate into interest-rate policy, and he did not give any new forecasts for the U.S. economic outlook. But Evans, who votes on U.S. monetary policy this year under a rotating voting system, hinted his preference is for a slow path of rate hikes.
• The yen held slightly weaker in Asia on Thursday with markets digesting the latest views of the Fed and looking for direction. The Federal Reserve's minutes for its May meeting, reflected similar concerns expressed in its statement released in early May, when the U.S. central bank kept its benchmark rate unchanged, highlighting a slowdown in economic activity. According to minutes, the central bank will announce cap limits on the total amount of maturing bonds it will allow to roll off each month without reinvesting. The process will allow the central bank to gradually shrink its balance sheet, and eases concerns of investors, who were unsure whether the central bank would adopt an aggressive approach to reducing its $4.5 trillion balance sheet. In their discussion concerning future interest rate policy, most Fed officials said a further increase in short-term interest rates will be needed "soon", should the economy remain on track, fuelling expectations that the U.S. central bank is poised to hike interest rates at its next meeting in June. The hawkish view that a rate hike was needed soon was offset by comments from some Fed members that further signs would need to show that weakness in the first-quarter was temporary, prior to future rate hikes.
• Gold gained in Asia on Thursday as investors saw after the U.S. Federal Reserve May meeting minutes overnight as dovish in tone on the timing of the next rate hike. Overnight, gold futures were steady as investors parsed the Fed minutes for possible changes in the outlook concerning the path of U.S. interest rate hikes, after the recent batch of economic data showed a slowdown in U.S. economic activity in the first quarter. U.S. GDP rose by annualized rate of just 0.7% for the first three months of 2017. It was the slowest period of first-quarter economic growth since 2014. Although, the US labor market continued to show signs of strength, as unemployment dropped to 4.4% the lowest level since 2007, the rate of inflation slowed to 2.2% in April from a peak of 2.7% achieved in February.
• Crude oil held gains in Asia on Thursday with all eyes on Vienna where OPEC and allied producers are widely expected to extend an oil output cut pact by nine months. OPEC is widely expected to extend an initial six-month oil output cut pact with allied producers led by Russia to March 2018 at a meeting in Vienna on Thursday that still may produce surprises on new producers joining and a more aggressive tone on compliance. Saudi Energy Minister Khalid al-Falih has led the charge as the world's top exporter and swing producer for the nearly 1.8 million barrels per day cut started in January and agreed to last November that quickly brought prices above $50 a barrel and unleashed a rapid supply response by then struggling U.S. shale oil producers. For the week ended May 19, the EIA said that crude oil inventories fell by 4.43 million barrels, compared to expectations of a draw of around 2.4 million barrels. Meanwhile, gasoline inventories dropped by only 0.485 million against expectations for a draw of 0.74 million barrels while distillate stockpiles fell by 0.485 million barrels, compared to expectations of a 0.74 million decline. The lower than expected drawdown in gasoline inventories offset the large drop in crude inventories, as investors remained concerned over the recent slowdown in gasoline demand. The data came a day ahead of the OPEC meeting on whether to extend the current supply-cut agreement. Kuwait, Iraq, Oman and Venezuela supported the Saudi-Russia agreement that production curbs needed to be extended for a period of nine-months until March 2018, to reduce global supply to the five-year average.Kuwaiti Oil Minister Issam Almarzooq, however, said Tuesday some countries are not in favour of a nine-month extension, but there’s a preliminary agreement on a six-month deal that will be reviewed in November.

Gold – XAU

Gold closed up on Wednesday and made its intraday high of 1258.78/oz and intraday low of US$1247.76/oz. Gold up by 0.587% at US$1258.41/oz.

Technicals in Focus:

In daily charts, prices are below 200DMA (1244) and breakage above will call for 1292-1300. MACD is below zero line and histograms are decreasing ktrend and it will bring downward stance in the upcoming sessions. RSI is approaching neutral region and more upside is expected before it touched overbought region. Stochastic Oscillator is in overbought territory and giving negative crossover to confirm bearish stance for intraday trade.

Trading Strategy: Neutral

Based on the charts and explanations above; sell below 1258-1276 keeping stop loss closing above 1284 and targeting 1247-1241 and 1228-1221. Buy above 1247-1207 with risk below 1207, targeting 1254-1264-1270 and 1276-1284.

Silver - XAG

Silver closed up on Wednesday made its intraday high of US$17.20/oz and intraday low of US$16.88/oz. Silver settled by up by 0.998% at US$17.20/oz.

Technicals in Focus:

On daily charts, silver is sustaining below 100DMA (17.36), breakage above will lead to 17.80-18.00. MACD is above zero line and histograms are increasing trend and it will bring bullish stance in the upcoming sessions. RSI is in oversold region, indicating buy signal for now. The Stochastic Oscillator is in oversold region and giving positive crossover to show upside move for the intraday trade.

Trading Strategy: Neutral

Based on the charts and explanations above, buy above 17.00-15.30 targeting 17.36-17.50 and 17.70-18.10; stop breakage below 15.00. Sell below 17.40-18.10 with stop loss above 18.10; targeting 16.90-16.30-16.10 and 15.65-15.30.

Oil - WTI

Crude Oil on Wednesday made an intra‐day high of US$51.86/bbl and made an intraday low of US$51.01/bbl and settled up by 0.349% at US$51.25/bbl on session close.

Technicals in Focus:

On daily charts, oil is sustaining below its 200DMA i.e. 49.74 which is a major resistance and breakage above will call for 50.30-51.00. MACD is below zero line and histograms are in decreasing mode will bring bearish stance in the upcoming sessions. The Stochastic Oscillator is in overbought region and giving positive crossover for confirmation of bullish stance; while the RSI is in oversold region and more downside can be expected.

Trading Strategy: Neutral

Based on the charts and explanations above; sell below 51.80-53.70 with stop loss at 53.70; targeting 51.50-51.00 and 50.10-49.20 and 48.40-48.00-47.15. Buy above 51.50-48.50 with risk daily closing below 48.50 and targeting 51.70-52.20 and 53.30-53.70.

EUR/USD

EUR/USD on Wednesday made an intraday low of US$1.1167/EUR and made an intraday high of US$1.1219/EUR and settled the day up by 0.321% at US$1.1217/EUR on session close.

Technicals in Focus:

On daily charts, prices are sustaining above 50DMA (1.0702), which become immediate support level, break below will target 1.0626-1.0600. MACD is below zero line but histograms are increasing mode which will bring bullish view. Stochastic is in oversold territory and giving sell crossovers to signal for bearish outlook for intraday. 14D RSI is currently in neutral region and giving upwards directions to consider buy.

Trading Strategy: Neutral to Sell

Based on the charts and explanations above; sell below 1.1260-1.1420 targeting 1.1200-1.1170-1.1100 and 1.1054-1.1000 with stop-loss at daily closing above 1.1100. Buy above 1.1200-1.1054 with risk below 1.1054 targeting 1.1260-1.1300 and 1.1365-1.1420.

GBP/USD

GBP/USD on Wednesday made an intra‐day low of US$1.2925/GBP and made an intraday high of US$1.2998/GBP and settled the day down by 0.0848% at US$1.2970/GBP on session close.

Technicals in Focus:

On daily charts, prices are sustaining above 200DMA (1.2616) is become major support level. 14-D RSI is currently in neutral region and direction is difficult to predict on RSI bases. The Stochastic Oscillator is in overbought territory and giving positive crossover to confirm bullish stance. MACD is below zero line and histograms are decreasing lead to downward movement.

Trading Strategy: Neutral to Sell

Based on the charts and explanations above; short positions below 1.2970-1.3100 with targets at 1.2900-1.2840 and 1.2775-1.2700, breakage above 1.3100 look for further upside with 1.3150 as targets. Buy above 1.2900-1.2705 with stop loss closing below 1.2700 targeting 1.2950-1.3015 and 1.3070-1.3100.

USD/JPY

USD/JPY on Wednesday made intra‐day low of JPY112.12/USD and made an intraday high of JPY111.12/USD and settled the day up by 0.268% at JPY111.47/USD.

Technicals in Focus:

In daily charts, JPY is sustaining above 200DMA (108.90), which is major support on the daily chart. 14-D RSI is currently is approaching oversold region. MACD is above zero line but histograms are in decreasing mode which might lead to downward movement. The Stochastic Oscillator is approaching overbought territory and signaling to sell as it has given negative crossover to confirm bearish stance.

Trading Strategy: Neutral to Buy

Long positions above 111.50-109.20 with targets of 112.00-112.60 and 113.20-114.60 with stop below 114.60. Sell below 112.00-113.20 with risk above 113.20 targeting 111.10-110.50 and 109.70-109.20.