The June FOMC meeting minutes revealed little clue regarding when the Federal Reserve will start its balance sheet cut plan.

In fact, the minutes showed divided opinions among Fed officials, with several members voicing concerns over potential market impacts and they hope to reduce the balance sheet with ‘limited’ disruption to financial markets.

The shrinking plan will have a long-term impact on market liquidity and could potentially cause mortgage rates to rise. This is similar to the scenario back to 2014, when the central bank start to plan for QE tapering, which triggered significant volatility in stock and forex market.

More importantly, the minutes also revealed concerns on equities – “increased risk tolerance among investors might be contributing to elevated asset prices more broadly; subdued market volatility, coupled with a low equity premium, could lead to a build up of risks to financial stability”.

Updates on Asia

Market impacts from the  North Korea’s missile launch on Tuesday proves to be short-lived again, despite the potential escalation of geographical tensions remain to be a risk element in the short term. Gold price see-sawed around to 1,220 area after a short surge on Tuesday, as investors tried to strike the right balance to price-in moderate levels of geopolitical uncertainties.

Asian equity markets rebounded on Wednesday, with China, Hong Kong and Singapore markets led the rallying. Singapore’s Straits Times Index surged 37 points or 1.17% to 3,248 points, with SGX’s daily trading volume increasing to S$1.149 billion – a clear jump from the previous day. Crude oil advanced for eight consecutive sessions, which helped underpin oil & gas and offshore names such as SembMar, Keppel Corp, Sembcorp etc. Small caps were extremely active too, with Kris Energy up 5%, Ezion up 4%.

Technical analysis

USD/JPY

  • 10-day Simple Moving Average sloped upwards
  • SuperTrend (10,2) remains in bullish set-up
  • Momentum indicator RSI has hit overbought zone above 70%, suggesting potential pullback
  • Immediate resistance level at 114.2 area
  • Immediate support level at 111.4 area

GBP/USD

  • SuperTrend (10,1.5) remains in bullish set-up
  • 10-Day Simple moving average slopped upwards
  • Immediate support level is 1.288
  • Immediate resistance level at 1.300-1.303 area

 

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