Although the FOMC minutes tilted towards hawkish, DBS Group Research maintains its view that two rate cuts are possible this year. For one thing, on the day after the Federal Reserve’s hawkish bent, producer price index (PPI) figures showed a continued decline in May. The final PPI figure in the US rose by 2.2% on a yearly basis in May, below market expectations of 2.5%, and lower than April’s reading of 2.3%.
The Straits Times Index fell some 30 points week-on-week and closed at 3,297, a tad below a secondary support area at 3,300. The 50-day moving average is at 3,280, and rising at around 3 points a day. That would put the STI at the 50-day moving average within a week.
Since short term indicators are at their equilibrium lines, and quarterly momentum has turned down but remains above its equilibrium line, the index could ease a bit further before staging a rebound. The most likely scenario is that prices move towards 3,290 before rebounding. For the time being, the upside of 3,450, indicated after the break above 3,250, and the move above 3,300, remains valid.
