Daily Market Lookup

• U.S. stock futures slid and sovereign bonds surged on Friday as investors feared President Donald Trump’s shock threat of tariffs on Mexico risked tipping the United States, and maybe the whole world, into recession. The investor mood darkened further when a key measure of Chinese manufacturing activity for May disappointed, raising questions about the effectiveness of Beijing’s stimulus steps. Markets moved aggressively to price in deeper rate cuts by the Federal Reserve this year, while bond yields touched fresh lows and curves inverted further in a warning of recession. Washington will impose a 5% tariff from June 10, which would then rise steadily to 25% until illegal immigration across the southern border was stopped. Trump announced the decision on Twitter late Thursday, catching markets completely by surprise Investors clearly reckoned that opening a new front in the trade wars would pressure central banks everywhere to consider new stimulus. On Thursday, Federal Reserve Board of Governors Vice Chair Richard Clarida had said the central bank would act if inflation stays too low or global and financial risks endanger the economic outlook Indeed, the case that the inflation slowdown was temporary took a blow when the core personal consumption expenditures index, the Fed’s favored measure of inflation, was revised down to 1% for the first quarter, from 1.3%. Trump’s tariff threat only added to the dangers and the market further narrowed the odds on Fed easing this year and next. Futures imply no less than 44 basis points of cuts by year end in the current effective funds rate of 2.38%. Such an inversion of the yield curve has presaged enough recessions in the past that investors are wagering the Fed will be forced to ease policy just as “insurance”.
• The Japanese yen rose on Friday in Asia amid safe-haven demand, while the Mexican Peso slumped amid news of unexpected tariffs imposed on Mexican goods. The Mexican peso is now near three-month lows against the dollar after U.S. President Donald Trump unexpected said the U.S. will slap a 5% tariff on all goods coming from Mexico. The tariff will kick in from June 10 and will last until illegal immigration is stopped, Trump said. The non-manufacturing PMI for May was 54.3, in line with expectations and unchanged from April. Meanwhile, the Japanese yen received some safe-haven bids today following reports that China has halted purchases of American soybeans amid disagreements over trade. Former governor of the People’s Bank of China Dai Xianglong’s comments that said he expected no major trade breakthrough when Chinese President Xi Jinping meets with his U.S. counterpart Donald Trump next month at the G-20 meeting also dented investors sentiment and boosted the safe-haven yen. The rise in the yen also came amidst a slew of data releases. Government data showed the country’s industrial output rose 0.6% from the previous month, compared with a 0.2% increase expected by analysts. Separate data also showed the country’s jobless rate fell to 2.4% in April, in line with expectations. Retail sales rose 0.5% in April from a year earlier, compared with the expected 0.8% increase.
• Gold prices rose on Friday in Asia amid news of unexpected tariffs on Mexican goods, while persisting Sino-U.S. trade tensions continued to attract safe-haven demand. Overnight, U.S. President Donald Trump said that Washington would impose a 5% tariff on Mexican goods. The tariff would become effective June 10, until that country stops immigrants from entering the U.S. illegally. Persisting Sino-U.S. trade tensions were also cited as a catalyst for the buying in safe-haven gold. Former governor of the People’s Bank of China Dai Xianglong said on Friday that he expected no major trade breakthrough when Chinese President Xi Jinping meets with his U.S. counterpart Donald Trump next month at the G-20 meeting. In other news, citing people familiar with the matter, a Bloomberg report said China has halted purchases of American soybeans and is not expected to resume the buying due to the disagreement over trade. Also adding to concerns is China’s latest factory activity data, which shrank more than expected in May. Gold is now on track for its first monthly gain since January.
• Oil prices traded lower on Friday in Asia as data showed U.S. crude inventories fell less than forecast last week. The U.S. Energy Information Administration said in its regular weekly report that crude oil inventories decreased by just 0.28 million barrels in the week to May 24. That was compared to forecasts for a stockpile draw of 0.86 million barrels after a build of 4.74 million barrels in the previous week. The number was also much less than the 5.3 million-barrel drawdown the American Petroleum Institute reported on Wednesday. The data was delayed by a day this week due to Monday’s Memorial Day holiday. Oil prices tumbled 4% yesterday immediately following the data, but clawed back some of their losses later in the day. In other news, the ongoing trade war between the U.S. and China, the world’s biggest oil importers, showed no signs of easing and has put oil under more pressure this week. Former governor of the People’s Bank of China Dai Xianglong said on Friday that he expected no major trade breakthrough when Chinese President Xi Jinping meets with his U.S. counterpart Donald Trump next month at the G-20 meeting. Meanwhile, U.S. President Donald Trump vowed to impose tariffs on all goods from Mexico, further escalating global trade tensions and raising concerns over economic growth and appetite for oil.

Gold – XAU

Gold on Thursday made its intraday high of US$1289.15/oz and low of US$1274.94/oz. Gold up by 0.672% at US$1288.30/oz.

Technicals in Focus:

In daily charts, prices are above 200DMA (1253) and breakage below will call for 1247. MACD is above zero line and histograms are decreasing trend and it will bring downward stance in the upcoming sessions. RSI is in neutral region and more upside is expected before it gets stretched. Stochastic Oscillator is in neutral territory and giving positive crossover to confirm bullish stance for intraday trade.

Trading Strategy: Buy on Dips

Based on the charts and explanations above; buy above 1284-1254 with risk below 1254, targeting 1294-1300 and 1309-1321. Sell below 1294-1319 keeping stop loss closing above 1319, targeting 1284-1276-1269 and 1261-1254.

Silver - XAG

Silver on Thursday made its intraday high of US$14.56/oz and low of US$14.35/oz. Silver settled up by 0.925% at US$14.50/oz.

Technicals in Focus:

On daily charts, silver is sustaining below200DMA (14.94), breakage above will lead to 15.60. 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 overbought region and giving positive crossover to show upside move for the intraday trade.

Trading Strategy: Buy on Dips

Based on the charts and explanations above, buy above 14.30-13.50 targeting 14.50-15.05-15.30 and 15.60-15.90; stop breakage below 13.50. Sell below 14.50-16.00 with stop loss above 16.00; targeting 14.30-13.90 and 13.50-13.20.

Oil - WTI

Crude Oil on Thursday made an intra‐day high of US$59.70/bbl, intraday low of US$56.37/bbl and settled down by 0.450% to close at US$56.43/bl.

Technicals in Focus:

On daily charts, oil is sustaining above its 100DMA i.e. 55.88 which is a resistance level and breakage above will call for 59.60. MACD is above zero line and histograms are in decreasing mode will bring bearish stance in the upcoming sessions. The Stochastic Oscillator is in oversold region and giving negative crossover for confirmation of bearish 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 56.50-60.00 with stop loss at 60.00; targeting 56.00-55.50-54.80 and 54.00-53.50. Buy above 56.00-53.50 with risk daily closing below 53.50 and targeting 56.50-57.30-58.25 and 59.00-60.00.

EUR/USD

EUR/USD on Thursday made an intraday low of US$1.1153/EUR, high of US$1.1142/EUR and settled the day down by 0.170% to close at US$1.1128/EUR.

Technicals in Focus:

On daily charts, prices are sustaining below 50DMA (1.1261), which become immediate resistance level, break above will target 1.1325-1.1410. MACD is below zero line but histograms are increasing mode which will bring bullish view. Stochastic is in neutral territory and giving positive crossovers to signal for bullish outlook for intraday. 14D RSI is currently in neutral region and giving no directions to consider.

Trading Strategy: Neutral to Buy

Buy above 1.1100-1.0950 with risk below 1.0950, targeting 1.1155-1.1200-1.1250 and 1.1280-1.1305-1.1350. Sell below 1.1150-1.1360 targeting 1.1100-1.1070 and 1.1020-1.0950 with stop-loss at daily closing above 1.0950.

GBP/USD

GBP/USD on Thursday made an intra‐day low of US$1.2579/GBP, high of US$1.2639/GBP and settled the day down by 0.363% to close at US$1.2605/GBP.

Technicals in Focus:

On daily charts, prices are sustaining above 200DMA (1.2960) 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 oversold territory and giving positive crossover to confirm bearish stance. MACD is above zero line but histograms are increasing lead to downward movement.

Trading Strategy: Neutral to Sell

Based on the charts and explanations above; sell below 1.2650-1.2890 with targets at 1.2600-1.2550 and 1.2500-1.2450 stop should be below 1.2890. Buy above 1.2650-1.2450 with targets 1.2650-1.2700-1.2750 and 1.2850-1.2890 with stop loss closing below 1.2500.

USD/JPY

USD/JPY on Thursday made intra‐day low of JPY109.46/USD and made an intraday high of JPY109.92/USD and settled the day up by 0.0219% at JPY109.60/USD.

Technicals in Focus:

In daily charts, JPY is sustaining above 100DMA (110.64), which is initial support on the daily chart. 14-D RSI is currently in overbought region and chances of downward are expected based on RSI. MACD is above zero line but histograms are in decreasing mode which might lead to downward movement. The Stochastic Oscillator is in oversold territory and signaling to sell as it has given negative crossover to confirm bearish stance.

Trading Strategy: Neutral to Sell

Sell below 110.00-113.00 with risk above 113.00 targeting 109.55-109.05 and 108.40-107.70. Long positions above 109.50-107.70 with targets of 110.00-110.60-111.5 and 111.90-112.25 with stop below 107.50.