Market softens ahead of FOMC and BOJ decisions; Crude drops

By Margaret yang, CMC Market
Commodities – Commodities traded lower on Monday, as traders became more cautious ahead of the FOMC and BOJ meetings this week. WTI oil futures closed 2.5% lower to $42.64 yesterday. Crude oil futures continued to consolidate as Kuwait’s post-strike production started to ramp up. Without a freeze plan, oil higher prices as compared to early Jan-Feb are likely to encourage more output, which will ultimately suppress the price. Gold is still range bound between $1,220 – $1,260, which are also the immediate support and resistance levels. Silver is near the $17.00 level and is hesitating to go higher or lower.
Equities – Asian equity markets opened lower on Monday as lower oil prices put pressure on the energy sector. Singapore’s oil and gas players Keppel Corp (-2.5%) and SembCorp Marine (-4.9%) ended lower. The Straits Times Index lost 1.7% yesterday. The Nikkei 225 index closed 0.76% lower as JPY strengthened against USD. The US market finished marginally lower. Uncertainty surrounding central banks’ monetary policies looms ahead of the FOMC and BOJ decisions this Thursday. Although the market has priced in a near-zero-percent rate hike in April’s FOMC meeting, any small changes or a strong hawkish stance could catalyse volatility globally.
Singapore’s March CPI has fallen -1.0% year-on-year, mainly due to lower accommodation and private transportation costs. This is the lowest reading since 1998, and is below the expectation of -0.7%. This reflects a further slip in the rental market and falling COE prices due to softening demand. The MAS core Inflation, which excludes the components of “accommodation” and “private transportation” from the CPI, has risen 0.6% year-on-year. This is close to the lower range of the MAS’s targeted 0.5-1.5% range.
FX – USD/JPY has retraced for a second day to 111.20 this morning. 112.00 remains an immediate resistance level for it to breakthrough in order to go higher. The market is eyeing the BOJ’s decision this Thursday and expectations of more easing have gradually built up ahead of the meeting. AUD/USD has retraced back to key support levels at 0.7700 as warnings pile up for China’s steel market after a recent rally. EUR/USD remains range bound within 1.1200-1.1400 as the ECB keeps rates unchanged.
Japan 225 – Cash

Key Technical levels to watch:

• Immediate resistance levels: 17,848 (50% Fibonacci level), followed by 18,025.
• Immediate support levels: 17,130(38.2% Fibonacci level), followed by 16,240.
• 60% RSI signals the tendency for mean-reversion.

Margaret Yang Yan, CFA, is a market analyst for CMC Markets Singapore.