By Margaret Yang, CMC Markets
Equities – The Chief Economist of China’s central bank forecasts that the economy will grow by 6.8% in 2016, higher than the 6.5% growth estimated by both the IMF and the Asian Development Bank.
The optimism has probably come from expansionary fiscal policy adopted by the policymaker, and accelerated investment into the real estate and infrastructure sectors, which remains the key driver of the economy’s growth.
The new forecast comes on the back of the May PPI data release on Thursday morning, which showed an easing deflation pressure on the wholesale prices. The producer price index (PPI) fell 2.8% year on year, above expectation, also registering an improvement compared to a 3.4% contraction in April.
Japan machinery orders fell 8.2% year on year, below the market forecast of -2.3%. The Nikkei dropped 1% due to the disappointing data and stronger yen.
FX – The Dollar Index rebounded sharply to 94.20 from 93.40, as the latest US unemployment claims surprisingly dropped by 4k to 264k, lower than the consensus number of 270k. This indicated that the jobs market may be more resilient than the market had thought, thus reducing the pessimism surrounding last Friday’s non-farm payrolls number.
USD/JPY traded higher at the 107.00 area this morning, with the immediate support and resistance levels at 105.60 and 108.00 respectively. EUR/USD fell to the 1.1300 area as the US dollar strengthened. USD/SGD has also rebounded to 1.3540. In the short term, a strong support level could be found around the 1.3400 area, with the resistance level at the 1.3800 area.
Commodities – The WTI crude oil price retraced from an eight-month high to $50.5 this morning, with the stronger US dollar probably the main reason behind this. The immediate support and resistance levels are $49.60 and $51.50 respectively.
Gold prices softened to $1,266 after hitting a three-week high of $1,270, with the immediate support and resistance levels at $1,240 and $1,286 respectively. Silver, on the other hand, advanced further to $17.29. Demand for safe-haven assets - due to rising uncertainty - is likely to provide support for gold and silver prices.
Crude Oil West Texas July 2016
Margaret Yang Yan, CFA, is a market analyst for CMC Markets Singapore.