The Dollar Index remains supported at the 90 handle, while Treasury yields near important levels. Gold and crude oil pared some of their previous week’s declines. The key event to watch out for this week would be Wednesday’s US CPI numbers.
- A strong showing in the US dollar last week drove the Dollar Index back above the 90 mark on Friday although the gauge still remains well below the next resistance of 92.
- The long term trend remains to the downside as well, as indicated by the trend channel in place since the beginning of 2017.
- DXY eased back to its 90 handle earlier on Monday following last week’s rally as investors await Wednesday’s CPI numbers to provide more clues on US inflation and the Fed’s future rate path trajectory.
- Stronger-than-expected inflation numbers will boost speculation the Fed will raise rates in 2018 more than the 3 times expected, which would it turn add on to last week’s dollar rally.
- The key resistance resides at 92 – a break above it would signal a breakout of the downtrend line since 2017.
- The benchmark 10yr Treasury yield last week broke strongly above a 2-decade long downtrend, signalling more pain to come for bond bulls. The next resistance lies at 3.00%, and could be reached over the near-to-medium term.
- The longer 30yr Treasury yield looks poised to follow the trajectory of its 10yr counterpart. The key resistance around 3.25% is likely to be tested soon. A break above it would signal a reversal of its downtrend of around 20 years.
- Faster-than-expected inflation growth on Wednesday could be the trigger to drive the 30yr yield above 3.25%. Bond traders will be keeping a close eye on this one.
- Having fallen for 2 consecutive weeks, gold looks to have found some reprieve just above its $1,300/Oz handle, rebounding on Friday and adding further gains early Monday.
- Continuing heightened volatility may increase demand in safe haven assets such as gold. However, sustained rallies may be capped due to the prospect of higher interest rates across most developed markets.
- $1,375/Oz represents a 3-year high and gold’s next resistance. To the downside, below $1,300/Oz, the next support comes in the form of the precious metal’s 200-week average at $1,233/Oz.
- Crude oil futures slipped Friday, falling back below $60/bbl and capping a 6-day losing streak. Futures pared losses earlier on Monday but remain capped at the $60/bbl handle.
- Crude oil’s recent collapse comes after data last week which showed American drillers raised the number of rigs exploring for oil to the highest since April 2015. In addition, daily oil production in the US has risen above 10 million barrels a day for the first time since 1970. That’s sparking fears that gains in US output will undermine OPEC’s effort to clear a glut.
- The US is close to becoming the world’s largest producer of crude and condensate, a form of light oil extracted from gas fields, even if it’s not quite there yet. It’s pretty much level with Saudi Arabia’s combined output, itself boosted by condensates not included in headline production numbers, and is closing on Russia’s 10.95 million daily barrels. That could be passed by the end of the summer, according to Citigroup.
Upcoming Key Events:
- US President Donald Trump will deliver his 2019 budget blueprint.
- The US consumer-price index, due Wednesday, probably increased at a moderate pace in January, economists project. Retail sales in the U.S., also out Wednesday, probably increased for a fifth straight month.
- Japan is expected to extend the longest stretch of economic growth since the mid-1990s when it reports fourth-quarter gross domestic product on Wednesday.
- UK inflation and Australian jobs data are due to be reported this week as well.
- On the home front, Singapore is scheduled to report December retail sales, January non-oil domestic exports, as well as last quarter’s GDP this week.
- Chinese New Year celebrations for the Year of the Dog begin in China and follow across much of Asia, including Hong Kong, Taiwan, Singapore, Malaysia and Indonesia. Chinese mainland markets are closed Feb. 15-21.
Weekly Thematic News:
Financial services workers will be among the first to be hit by the rise of automation while women will feel the effects earlier than men, according to research by PricewaterhouseCoopers. The report, which analyzed more than 200,000 jobs across 29 countries, anticipates three stages of automation between now and the mid-2030s, which will eventually impact almost one third of UK workers. The first, the algorithm wave, is already underway.
Whether we like it or not, robots and automation are here to stay. Investors looking to capitalize on this trend can do so by buying into the Robotics US portfolio on iAdvisor. The portfolio has returned 42.5% year-on-year, and focuses on companies that are well-established in the field of robotics and automation and have garnered a healthy return on invested capital.