Issue#: 392/2017

Weekly Macro:

US Dollar:

  • The US dollar weakened last week to register its first weekly decline in four, and seems to have found some support around its 50-day and 200-week moving averages – both residing around the 93.000 handle.
  • The major trend for the year still remains to the downside, as shown by the downtrend channels in the daily and weekly charts. The resistance remains at the stronghold of 94.267 – a break above that may lead to a dollar correction coming into the end of the year.
  • To the downside, a failure to hold above the 200-week average of 93.006 this week is likely to more pain for dollar bulls, especially after renewed inflation concerns following last Friday’s softer-than-expected US CPI data.
  • With geopolitical concerns stemming from the US’s increasingly shaky relationship with North Korea and Turkey, further weakness in the greenback is possible. One factor that could stem the tide is the possible budget resolution which may be taken up by the Senate this week that would allow Republicans to pass a tax bill by simple majority, thus dodging potential Democratic filibusters.

Treasuries:

  • Similar to the dollar, the benchmark 10yr Treasury yield snapped 4 consecutive weekly gains last week, retreating from a 5-month high near the 2.40% resistance back to 2.27% Friday. Yields broadly fell on the back of weaker-than-expected inflation data released last Friday.
  • The probability of a rate hike by year-end slipped to 73%, from 78% a week ago, according to pricing data on Bloomberg.
  • The key level to watch is undoubtedly the 2.40% resistance, a break above should pave the way for the 2.60%. To the downside, a pullback to 2.20% this week is conceivable.

Gold:

  • Gold rebounded sharply from a 2-month low to climb back above the $1,300/Oz Friday, closing above it for the first time in 2 weeks.
  • On the weekly chart, the technical bias remains to the upside, following the precious metal’s breakout above its multi-year downtrend line back in August. Unless gold falls back below $1,260/Oz, the long-term bias is likely to remain to the upside. If gold manages to hold above the psychological $1,300/Oz, it is likely to retest its 1-year high of $1,357/Oz.

  • Bullion posted its best weekly gain in more than a month, driven by renewed global geopolitical tensions in Spain, North Korea and Turkey, and a weaker US dollar. The other main driver was the more dovish-than-expected FOMC September minutes that signalled some officials were looking at a stronger case of inflation before supporting another rate-hike; Friday’s weaker CPI data supported that notion. Political uncertainty in the US has also hurt the dollar, which in turn benefits gold; that could persist as Congress continues to debate a new tax plan.

Oil:

  • Crude oil advanced to its highest in 2 weeks Friday, and climbed further Monday after reaching the $52/bbl handle. Crude oil prices were mainly driven by speculation over potential disruptions to output in a region that’s home to Iraq’s oldest producing oil fields.
  • Investors have largely been optimistic about the rebalancing of the oil market, with crude oil futures rising in 6 out of the past 7 weeks. OPEC stated over the weekend that it expects crude demand to grow at a “healthy pace” over the next 5 years.
  • The 5-month high of $52.86/bbl is the key resistance level to watch, while a decline back to $49/bbl, although unlikely, should not be ruled out yet.

Upcoming Key Events:

  • The US and South Korean navies on Monday began a joint drill involving around 40 warships, amid signs North Korea is preparing for another provocation such as a missile launch. North Korea’s state-run media agency KCNA on Saturday criticized the joint military exercise, calling it a “reckless act of war maniacs.”
  • Chinese President Xi Jinping gives the opening speech at the 19th Communist Party Congress in Beijing on Wednesday.
  • On the economic front, China releases data for GDP, industrial production and retail sales on Thursday, while the US reports industrial production on Tuesday. In Singapore, NODX on Tuesday is expected to reflect a slower pace of expansion in September.
  • Earnings season gets into full swing with major US financial firms including Morgan Stanley, Goldman Sachs Group Inc. and Blackstone Group LP posting results. Netflix Inc. and General Electric Co. are also reporting.
  • The Reserve Bank of Australia’s latest meeting minutes will be released on 17 Oct. Bank of England Governor Mark Carney appears before the UK Parliament’s Treasury Committee for the first time since June’s election on Tuesday.
  • Traders will also be watching political developments in Germany. German Chancellor Angela Merkel heads into talks this week to form a national government weakened after her Christian Democratic Union suffered a defeat in Lower Saxony, Volkswagen AG’s home state.
  • Polls show that Prime Minister Shinzo Abe is on track to win Japan’s Oct. 22 election. Victory for Abe would likely prolong the loose monetary policy Japan has deployed to kick-start its economy.

 

 

Weekly Thematic News:

Singapore Real Estate:

Singapore home sales fell in September as developers marketed fewer projects in a month considered inauspicious by Chinese homebuyers. Developers sold 657 units last month, down from a revised 1,246 in August, according to Urban Redevelopment Authority data released Monday. That’s the lowest sales since January. A total of 73 new units were offered, down from 794 in August, the data showed.

Despite a slow month, Singapore’s property market is showing signs of a turnaround. Home prices rose for the first time in 4 years, snapping a record run of declines and confirming recent signs that the property market is rebounding.

As of Monday, the Smart Real Estate Singapore portfolio on iAdvisor is currently up 23.9% year-on-year, outperforming other REIT indices such as the SGX S-REIT 20 (+14.6%) and the FTSE Straits Times REIT (+14.9%).

 

 

© Jachin Capital Pte Ltd

UEN: 201419754M


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