US GDP

The US fourth quarter GDP numbers on Friday gave most markets there a soothing calm after what had been a jittery week. The fourth quarter reading came in at 2.2% versus a market estimate of 2.4%. Stocks there ended slightly flat to firmer with strength from semi-con names on the rumour of possible M+A stories in the sector. Meanwhile, treasuries rallied slightly, with the 10-year yield back down to 1.96%. The improvement in household consumption was a highlight of the GDP numbers –accounting for as much as two thirds of the US economy. It came in at a 4.4% increase (annualised), the highest in almost ten years. Key dollar pairs including the EUR/USD and the AUD/USD pulled slightly back after testing key resistance of 1.10 and 0.795 respectively earlier in the week. The EUR/USD on Friday touched an intraday low of 1.08 before finding late day strength to close at 1.089. Similarly, AUD/USD traded a high of 0.784 before pulling back to close at its 20-day MA at 0.774. Between the two pairs, the Aussie looks the more positive from purely a technical basis, as it has managed to break above its descending channel (seen below) and seems to be consolidating nicely above this breakout level of 0.774.

Central Bankers Speak

Fed chair Mrs Yellen’s speech last Friday did not manage to move markets in late day trade as she reiterated the Fed’s stance on being decisive about a rate hike, but at the same time accommodative over its pace of subsequent hikes thereafter. She referred to lessons learned from the mistakes of central bankers from Sweden and Japan who had hiked rates consecutively too early into their respective economic recoveries, and dragged these economies back down the slippery slope of deflation soon afterwards. At the BOAO Forum in China over the weekend, PBOC Governor, Zhou Xiaochuan repeated his reassurance that China has the scope to act, implementing either further cuts on interest rates or even 'quantitative' measures to counter any slowdown and deflationary worries that China may face.

Yemen conflict and Crude

Crude also offered traders a good range to trade last week with a high/low range of as much as 15%. The spike in the price of oil over the Yemen conflict late on Thursday proved to be a one-day factor, as both WTI and Brent gave back slightly over 4% on Friday’s action, as bulls took their best weekly profits in over six months.

Singapore commodity names

Perhaps encouraged by a softer USD and stronger crude oil prices last week , palm oil names in Singapore including Golden Agri and Wilmar saw some late buying into the close on Friday. Palm oil plays, once a key favourite amongst traders, have languished this past year, staying in the shadows of weaker crude oil prices. Amongst some of the listed plays, First Resources looks attractive here at 10.5X TTM PE, especially after having lost as much as 40% over the past year. Looking at the charts, a 'three thrusts reversal' pattern seems to be forming. If the stock can break S$1.885, a test of its next resistance at S$1.915 and S$1.98 is possible. However, if the first support for the stock at S$1.825 fails to hold, we may also see it slide back to test its 2015 low of S$1.785.
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