Malaysia: Trade balance figures came on the strong side – UOB

 UOB Group’s Senior Economist Julia Goh and Economist Loke Siew Ting review the latest trade balance figures in Malaysia.

Key Quotes

“Malaysia’s external trade surprisingly posted stronger gains last month, in part due to year-ago low base effects. Export growth hit a 16-month high of 48.2% y/y in Aug (Jul: +38.0%, UOB est: +30.5%, Bloomberg est: +34.3%) as a result of a triple-digit gain in re-exports (+112.5%) versus a double digit gain in domestic exports (+34.8%). Imports posted the largest ever annual growth on record, at 67.6% (Jul: +41.8%, UOB est: +48.0%, Bloomberg est: +48.0%). This brought trade surplus higher to MYR16.9bn from MYR15.6bn in the preceding month.”

“Increased shipments of commodity-based and electrical & electronic (E&E) products amid stronger demand from almost all trading partners were key drivers of robust export growth in Aug. Exports of petroleum products, liquefied natural gas (LNG) and optical & scientific equipment registered the highest monthly value in the month. Exports to the ASEAN region, South Korea and Hong Kong improved by more than 50% while shipments to the US jumped the most in 15 months by 38.2%.”

“Given that Aug’s export reading defied our earlier expectations of a soft patch in the greater part of 2H22 and the 30.3% year-to-date export growth moved further apart from our full-year growth target of 18.0%, we now upgrade our export growth projection to 26.0% for 2022 with statistical base and commodity price effects remaining wildcards for the outlook. We expect the recent retreat in major commodity prices and lingering global uncertainties particularly a global recession risk to weigh on Malaysia’s export outlook going into 2023, leading to a modest export growth of 1.5% next year.”

USD/CNH: Next on the upside comes 7.0500 – UOB

 Quek Ser Leang at UOB Group’s Global Economics & Markets Research suggests USD/CNH could retest 7.1000 once 7.0500 is cleared.

Key Quotes

“In our last Chart of the Day update from 29 Aug 2022, when USD/CNH was trading at a much lower level of 6.9200, we titled our update ‘USD/CNH could continue to advance, likely at a rapid pace as there are hardly any resistance levels of note until 7.0000’. While our view of a ‘rapid pace of advance’ was not wrong, USD/CNH did not break 7.0000 as it soared to 6.9967 about a week later before pulling back to a low of 6.9100.”

“USD/CNH rebounded sharply from 6.9100 and yesterday (15 Sep 2022), it cracked 7.0000. The break of the ‘psychological level’ resulted in a swift and sharp surge and USD/CNH continues to accelerate higher today. The price actions are not surprising as the next resistance level of note is at 7.0500. Looking ahead, if 7.0500 is broken, the focus will shift to 7.1000. Within these couple of months, the 2019 and 2020 highs, both near 7.1960, are unlikely to come into view.”

On the downside, the rising trend-line support, currently at 6.9400, is a strong support level but only a breach of the 21-day exponential moving average (at the time of writing, the level is at 6.9260) would indicate the current strong upward pressure has eased.”

Silver Price Analysis: XAG/USD maintains a large top, further downside ahead – Credit Suisse

 Silver maintains the top analysts at Credit Suisse have been highlighting since mid-May. Therefore, XAG/USD is expected to decline towards the $15.56 support.

Break above $21.39 remains needed to negate the top

“Silver has risen back above the crucial 61.8% retracement support of the whole 2020/21 upmove at $18.65/15, however, still maintains a large top below $21.39 and we hence expect further downside from here towards the $15.56 support from a technical analysis perspective.”

“Next resistance is seen at $20.87 and above $21.39 remains needed to negate the top.”

USD strength to persist into early next year – Rabobank

 In the view of economists at Rabobank, the US dollar is set to remain well supported for several months with the hawkish position of the Fed underpinning the attraction of the greenback as a safe haven.

Scope for further dips in EUR/USD below parity

“As the Fed still has a lot of work to do in taming price pressures and ensuring that inflation expectations are well anchored into the medium-term, it can be assumed that the FOMC will not be ready to relinquish its hawkish position just yet. Since this will impact risky assets, we see risk that USD strength persists into early next year.”

“We expect the USD to remain the favoured safe haven relative to either the JPY or the CHF in view of higher US short-term interest rates.”

“Given also that the eurozone is facing a difficult winter which includes the possibility of energy rationing for some businesses, we see scope for further dips in EUR/USD below parity.”

Malaysia: BNM hikes rates again – UOB

 

Senior Economist Julia Goh and Economist Loke Siew Ting at UOB Group review the latest interest rate decision by the BNM.

Key Takeaways

“As widely expected, Bank Negara Malaysia (BNM) raised the Overnight Policy Rate (OPR) today (8 Sep) by 25bps to 2.50%. This marks the third back-to-back rate hike since BNM started the hiking cycle in May this year as the economy recovered at a stronger pace. To date, BNM has hiked 75bps, which partly reversed the 125bps of rate cuts since the start of the pandemic in Jan 2020.”

“In the latest monetary policy statement (MPS), BNM continues to expect the domestic economy to expand, supported by private sector spending amid the transition to endemicity, positive labour market conditions, resumption of tourism activities and investments. However, BNM cautioned that external demand is expected to moderate amid softer global growth. BNM expects inflation to peak in 3Q22 before moderating thereafter amid abating base effects and easing global commodity prices.”

“BNM highlighted that there is no ‘pre-set course’ and the monetary policy committee (MPC) will continue to assess developments and their impact on domestic inflation and growth. BNM also reiterated that any adjustments will be done in a ‘measured and gradual’ manner. We think BNM may have signalled a temporary pause for rate hikes pending forward-looking growth and inflation dynamics. As such, we maintain our OPR target at 2.50% by year-end, and 3.00% by mid-2023. The next and final monetary policy meeting for the year is on 2-3 Nov.”

US Dollar Index looks bid above 107.00 ahead of PMIs

 

• The index posts decent gains beyond the 107.00 mark.
• US yields extend the decline across the curve on Friday.
• Flash Manufacturing/Services PMIs next on tap in the docket.

The greenback, in terms of the US Dollar Index (DXY), leaves behind Thursday’s pullback and regains the area beyond 107.00 the figure at the end of the week.

US Dollar Index now looks to data, FOMC

The index extends the erratic performance so far this week and advances north of the 107.00 yardstick, as market participants seen to have already digested the start of the hiking cycle by the ECB on Thursday.

Contrasting with the upbeat tone in the buck, yields in the US cash markets continue their march south and already navigate in multi-session lows across the curve ahead of the key FOMC event due on July 27.

In the NA session, the advanced Manufacturing and Services PMIs for the month of July will be the only releases of note later in the NA session.

What to look for around USD

The index looks side-lined in the 107.00 neighbourhood amidst a broad-based range bound theme so far this week.

In the meantime, the dollar remains underpinned by the Fed’s divergence vs. most of its G10 peers (especially the ECB) in combination with bouts of geopolitical effervescence and the re-emergence of the risk aversion among investors. On the flip side, market chatter of a potential US recession could temporarily undermine the uptrend trajectory of the dollar somewhat.

Key events in the US this week: Flash PMIs (Friday).

Eminent issues on the back boiler: Hard/soft/softish? landing of the US economy. Escalating geopolitical effervescence vs. Russia and China. Fed’s more aggressive rate path this year and 2023. US-China trade conflict. Future of Biden’s Build Back Better plan.

US Dollar Index relevant levels

Now, the index is up 0.49% at 107.12 and faces next contention at 106.38 (weekly low July 20) followed by 103.67 (weekly low June 27) and finally 103.41 (weekly low June 16). On the other hand, a break above 109.29 (2022 high July 15) would expose 109.77 (monthly high September 2002) and then 110.00 (round level).

EUR/USD hovers around 1.0700 amid subdued DXY, US GDP eyed

 EUR/USD is hovering around 1.0700 and is expected to establish above the same amid a broadly subdued US dollar index (DXY). EUR bulls are swiftly scaling higher after the less hawkish Fed minutes downed the US dollar. Focus on US GDP and PCE inflation. 

EUR/USD pares intraday gains around 1.0700 while stepping back from an immediate resistance line. In doing so, the major currency pair reverses the previous day’s pullback from the monthly high during Thursday’s Asian session.

Although a downward sloping trend line from Tuesday restricts the nearby EUR/USD upside around 1.0710, the quote’s ability to stay firmer past the 100-HMA and the 200-HMA keeps the buyers hopeful of overcoming the nearby hurdle.

Also favoring the upside bias is a one-week-old ascending trend line and the bullish MACD signals, not to forget firmer RSI (14).

Bolstered rate hike expectations by the European Central Bank (ECB) have underpinned the euro against the greenback. Inflation is affecting the real income of the households in the eurozone and the ECB has yet not paddled up its interest rates unlike the other Western leaders, which are featuring 50 basis points (bps) rate hikes. The eurozone inflation has reached 7.5% and the ECB needs to tighten its sleeves and announce quantitative restrictions.

Meanwhile, Dutch Central Bank head and ECB Governing Council member Klass Knot stated on Wednesday that inflation expectations will remain well-anchored at its upper limit and a rate hike by 50 bps is not off the table.

On the dollar front, the DXY is underperforming broadly despite the release of the extremely hawkish Federal Open Market Committee (FOMC) minutes. As per the minutes, all Fed policymakers were in favor of a jumbo rate hike announcement. Also, they believe that the benchmark rates should be sent close to the neutral rates quickly. Inflation will remain anchored at elevated levels and the labor market is extremely tight.

Going forward, investors will respond to the US Gross Domestic Product (GDP) and Personal Consumption Expenditure (PCE) numbers. The US GDP is seen unchanged at -1.4% on annual basis. Also, the US PCE is expected to remain stable at 7%.

EUR/USD eyes 2020 lows at 1.0637 as USD regains poise

 

 The latest candle on the four-hour chart closed below 1.0700. The Relative Strength Index (RSI) indicator on the same chart stays near 40 and the descending line coming from April 21 stays intact, highlighting EUR/USD's bearish bias in the near term. 

It's worth noting that EUR/USD will touch its weakest level since April 2017 with a drop below 1.0635. Sellers might see such a move as a profit-taking opportunity and trigger a correction in the pair. In that case, 1.0700 (psychological level) aligns as the next recovery target before 1.0730 (static level) and 1.0760 (static level).

On the downside, a daily close below 1.0640 is likely to open the door for additional losses toward 1.0600 (psychological level) and 1.0570 (static level from March 2017).

📕 Comment on Gold on April 22, 2022:

 📕 Comment on Gold on April 22, 2022:

 - After falling to 1935 in yesterday's session, precious metal Gold rebounded and closed the day's trading session with a bearish candle around the 1950 price. This is the 3rd day in a row that World Gold closes.  around this price.  In my personal opinion, the possibility that Gold in the beginning of today's trading session will still be supported around the 1940-1945 price zone.

 - On the H4 chart, we can clearly see the precious metal's withdrawal signal around the upper price range so we can consider buying with a safe target around 1960 in today's session.

AUD/USD to advance back toward 0.75 by year-end – ANZ

 After a tough start to the year, the AUD has rebounded convincingly to become one of the leaders in the G10. Economists at ANZ Bank expect the AUD/USD to move sideways in the near-term before staging a leg higher to the 0.75 level by year-end.

Challenging risk environment will keep rallies capped 

“The terms of trade improvement and a strong domestic economy are likely to keep the AUD well supported, though a challenging risk environment will keep rallies capped.”

“We believe the aussie will be mostly rangebound through the middle part of 2022 before a global growth recovery helps propel a move back to 0.75 by year-end.”

AUD GOES UP TO 200%

 There has been a cause for pause against that moving average level over the last few hours. However a break above should open the door for further upside probing with the 50% midpoint of the move down from the January 13 high at 0.71403 as the next target to get to and through.

What next?

With traders pausing near the 200 hour moving average, there is the risk of sellers to take back more control and move the price back below the 0.70995 level ( 38.2% retracement) and toward the swing area between 0.7080 and 0.7090. Move below that level, and the 100 hour moving average will be targeted once again.

As mentioned above, a move back above the 200 hour moving average would open up the door for a test of the 50% of 0.71403

Fundamentally today, the Reserve Bank of Australia said they would stop the quantitative easing (that was expected). They also said that they expect inflation to move higher albeit temporarily, but above there 2% target (you can read the details on FOREX ADVICE CLUB). That projection helped to reverse the trend and pushed the price back above its 100 hour moving average.

 The AUDUSD is trading to a new session low. Risk off sentiment is kicking in as the Nasdaq is now down -93 points and the S&P has also now turned negative on the day. The Dow is holding onto a 60 point gain.

Looking at the daily chart, the pair has entered into a swing area between 0.6992 and 0.70627. That area goes back to the end of 2019. In early November 2020, the pair bottomed one last time in that area before moving higher (peaking in February of 2021) at 0.75544.

Since that cycle high, the pair has steadily moved back down, ultimately retesting the 2019/2020 swing area in December 2021. The subsequent bounce higher saw the 100 hour MA stall the rise in early January 2022. On January 13, a try above the 100 day MA failed. The price retested the level last week, but again found sellers. Buyers turned to sellers again. The 100 day MA currently come in at 07264.

Drilling to the 4-hour chart below, the pair has most recently moved away from a lower swing area between 0.7080 to 0.7090 (see green numbered circles on the chart below). That area is now close risk. Stay below keeps the sellers more in control with the low target from the daily at 0.6992 (the low in December reached 0.69935 before bouncing), the next key target. Move below it, and the door opens more to the downside.

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Dollar got high today

LONDON/HONG KONG (Reuters) -The dollar inched higher on Monday, moving further off its recent two-month lows, lifted by the tension between Russia and the West over Ukraine and the possibility of a more hawkish stance from the Federal Reserve this week.

Markets were until recently not fretting about the massing of Russian troops on Ukraine's borders, but tensions have tightened several notches of late, with U.S. President Joe Biden considering boosting military assets in Eastern Europe and ordering diplomats' families to leave Kyiv.

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ING Bank strategist Francesco Pesole said markets were pricing more of a risk premium into the euro, with fears worsening that Russia's standoff with the West could prompt it to curb energy supplies to Europe.

Meanwhile, the IHS Markit Flash Composite Purchasing Managers' Index for the euro zone, a gauge of economic health, dropped in January to its lowest since last February.

The euro slipped 0.15% by 0845 GMT to $1.1325, trading just off two-week lows touched on Friday, while the dollar index was 0.10% higher at 95.72.

The greenback also gained 0.1% on the safe-haven yen with a dollar worth 113.8 yen, though the Japanese currency was still near its recent top of 113.47.

The dollar index has gained some 1.3% off since Jan. 14. During this period, several banks have upped forecasts for the speed and size of policy tightening by the U.S. Federal Reserve.

The Fed starts a two-day meeting on Tuesday and may signal the start of interest rate rises from March while indicating how fast it will move with reducing the size of its balance sheet.

Most expect the first hike to 0.25% in March and three more to 1.0% by year end..

However, positioning data showed on Friday speculators cut net long positioning on the dollar to the lowest since September and instead added $2.6 billion worth of net positions.

ING's Pesole said leaving aside the Ukraine situation, the dollar recovery could stall if the Fed signalled an implicit preference for balance sheet reduction as a means to tighten policy.

"If markets see the Fed willing to let balance sheet reduction do the heavy lifting, that may force a scaleback in forecasts for the number of rate hikes," he said.

"The dollar will find more support from actual rate hike expectations than expectations of draining liquidity out of the market."

The Australian dollar meanwhile slipped 0.25% to two-week lows of A$0.71.52 against the greenback, ahead of Tuesday data that may show core inflation at 2.4%, the fastest rate of price growth since 2014..

The one currency to hold firm against the dollar was the Chinese yuan, which rose 0.2% to the highest since May 2018 at 6.328

Finally, Bitcoin which has almost halved in value since touching a $69,000 record in November, looked at risk of falling under $34,000 for the first time since last July.

It lost 3.6% to trade around $34,962, while ether, the world's second-largest cryptocurrency, was at $2,379, having hit its lowest since July on Saturday

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Dollar Rises as Treasury Yields Hit 2-Year High

The dollar rose in early dealings in Europe on Tuesday, pulled higher as concerns over inflation pushed 10-year U.S. government bond yields to their highest in over two years. 

The yield on the 10-year U.S. benchmark rose as high as 1.86% in the overnight session, a level it last saw when practically no-one outside China had heard of Covid-19.  The two-year benchmark yield, which is more sensitive to expectations for short-term interest rates, also broke above 1% for the first time in two years.

By 3 AM ET (0800 GMT), the dollar index, which tracks the greenback against a basket of advanced economy currencies, was up 0.1% at 95.287. 

The dollar returned briefly above the 115 yen level after Bank of Japan Governor Haruhiko Kuroda said the bank hadn't discussed the possibility of raising interest rates, as had been reported by newswires last week. That was despite the fact that the bank raised its outlook for inflation slightly to 1.1% for the next two years. That is still well below the bank's 2% target.

"For the foreseeable future, we see little chance of the BoJ adjusting policy rates," said Oxford Economics analyst Shreena Patel. "We believe the yen will remain weak this year but that room for further depreciation is limited."

USD/JPY traded at 114.79, up 0.2% on the day. 

The dollar had hit a five-year high against the yen earlier this month, amid expectations that the Federal Reserve will tighten monetary policy much more this year than the BoJ. The Fed's first policy meeting of the year takes place next week, and policymakers have now entered their usual blackout period ahead of it. 

In Europe, the pound was flat against the dollar at $1.3639 but edged up against the euro despite numbers showing that unemployment fell by less than expected in the three months through November. Analysts zeroed in on a sharp downward revision to the claimant count in November and to a bigger-than-expected drop again in December, suggesting that the U.K. economy rode out the first part of the winter wave of Covid-19 comfortably enough.

The euro was also little changed against the dollar at $1.1402, ahead of the release of the German ZEW economic sentiment index for January.

In emerging markets, the ruble weakened again amid growing fears that President Vladimir Putin will send his tanks across the Ukrainian border again. USD/RUB rose 0.4% to 76.40, although the movement was largely in line with other emerging market currencies as the dollar strengthened again. 

The ruble typically reacts badly to geopolitical shocks emanating from Russia, but the country's foreign exchange reserves stand at a record high, while its public debt is low and foreign currency borrowing by its corporates has fallen by nearly half since the last time it invaded Ukraine in 2014. With prices for oil and other commodity prices still high, the ruble has various pillars supporting it. 

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Weekly Overview on Currencies

 Currencies

MARKET VIEW

Weekly changes: EURUSD +0.61%, GBPUSD +0.28%, USDCAD +0.13%

EURUSD closed the week at 1.16425. The pair reached the 1.1670 mark twice but declined both times from the strength of the current resistance level.

GBPUSD ended Friday at 1.37551. The pair traded modestly within a week, having risen 2.4% in the previous fortnight.

USDCAD closed the week at 1.23583, the same spot as the Friday ago. The oil stepped from its three-year high, giving the Canadian dollar space to consolidate.

BULLISH TRIGGERS

The U.S. dollar eased after Powell's comment, enabling EURUSD to advance near the 1.1650 level. However, the eurozone inflation expectations are at their highest levels in years. This puts additional pressure on the ECB and its monetary policy agenda meeting this week.

GBPUSD changed insignificantly. The British pound fluctuated due to the country's various economic releases but remained bullish by late Friday. Early in November, the BoE is expected to be the first major central bank to lift its interest rate.

BEARISH TRIGGERS

The USDCAD finished the week flat, slowing its monthly-long decline. The BoC interest rate decision meeting this week might propose another round of tapering. Two days later, Canada will release its GDP data. The central bank's choice of tight or dovish tone of voice, followed by the solid or weak data, will determine USDCAD behaviour this week.

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Overview on XAUUSD by Money Life Research

  The gold market price underwent a horizontal movement after the rise that took place last week, since this horizontal movement has been lingering since the market opened earlier this week.  Today look at the trends and reactions of the market.  Chances are it will drag on until the market shows the next reaction.

 On the chart, yesterday’s price is only testing at the next highest price where the resistance has been successfully broken at the price of 1800.00

 The continuation, at the current price now at 1815.00, this is the highest price yesterday.  What potential is seen can happen.  There are 2 probabilities that can occur at the current price.

 On my observation on the chart, the first thing that can happen is a rejection in the m15 timeframe because at the price of 1815.00 is the nearest resistance accompanied by a trendline confluence that was retested a few minutes ago.  So through this probability, a potential downtrend can occur.

 The second is a breakout at the price of 1815.00 and the fixed price continues to rise at least on hitting the price of 1825.00.  This is because in the past trend the downtrend still dominated the market price only after the increase took place, now the price makes a horizontal movement.  So a horizontal movement like this is no problem to buy and sell at the lowest and highest prices.

 If I do an entry sell, the risk and reward that I will take is between 1: 1.5-1: 3

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Preliminary assessment of the market on July 27

 Preliminary assessment of the market on July 27.

There are few important economic data to be released today - However, "US consumer confidence" data scheduled for release at should also be kept in mind.

 The market is still in a state of waiting for the late night fomc meeting tomorrow night.  Therefore, news related to the Covid-19 epidemic should also pay attention to investors.

 Currently, the market is expected to continue moving sideways, waiting for fomc.

 1. Gold 7/27:

 The expected range is still running in the 1790-1810 zone.  Buy and sell near this border area.

Buy Limit #XAUUSD #GOLD AT 1790 and 1792

SL: 1785

TP: 18XX 18XX

2. GBPUSD 7/27:

 As the number of covid-19 infections in the UK decreased after the UK lifted the blockade orders ==> GBP is supported.

#GBPUSD broke the 1.37800-1.38000 zone which is likely to extend the upside momentum to 1.39000.  So buy.

Buy Limit GBPUSD AT 1.3780 and 1.3800

SL:  1.3740

TP:  1.3XXX

 3. Bitcoin 7/27.

The resistance is still around 41k.  Traders can watch bitcoin's reaction to this resistance zone

 Bitcoin Range : 29k-41k

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