In our previous prediction for the third quarter (3Q), the deepening euro debt among Greece and Spain, together with sloppy British economy, had pushed up the US dollar in high demand.
The effect of stronger dollar capped the prices of all commodities including crude palm oil (CPO) in weak sentiments until mid August.
When the European Central Bank (ECB) stood under sheer pressures to stub out the euro debt issues, President Mario Draghi vowed to work hands in hands with euro leaders to mitigate the viral contagion of recession in euro area.
After mid August, ECB announced the plan to purchase unlimited bonds for supporting the ailing nations.
The conditions for such borrowing regulation are tough and no borrowers have stepped forward so far.
However, this has helped to push the euro currency up from the recent bottoms near to 1.2000 benchmarks against dollar up to 1.2900 levels in mid September.
In tandem to this weakening dollar trend, what made it slide faster is the double impact when US FED chairman Ben Bernanke reiterated in the annual Jackson Hole forum during end August that imminent stimulus would be issued in the wake of rising unemployment.
In early September, we saw a reversal in CPO prices going up from 2,820 bottoms amid US dollar plunge.
While ECB mentioned its stimulus but without action seen yet, we reckon US will probably keep shooting its verbal bullets to support market demands until President Obama can be re-elected in last quarter.
On September 7, China joined in the ‘market hot-talk’ by announcing its stimulus plan in building 2018 kilometres of roads and subways in 18 cities that would stretch over at least a decade.
This lifted general commodities and equity indices in Asia in expecting demands.
The FOMC meeting outcome on September 13 hammered the US dollar lower following the announcement of QE3 by Bernanke.
The FED policymakers pledged to inject monthly US$40 billion into the mortgage debts and support the housing markets.
Commodity prices and Equity index jumped again to highest levels within the third quarter.
What we foresee that might happen in the Q4 could be poising for higher gains in Asia stock index amid fi rm commodity prices.
Though we agree the global economies are fragile and the Western leaders are braving the rockclimbing wall in bare hands and worn-out slippers, do not underestimate the last firepower they will use to create a beautiful ‘firework’ despite the short appearance.
In these very short moments of illusions, huge funds will be ‘transferred’ in the global markets from retail investors to sovereign funds when men-in-the-streets start to believe in the ‘beginning of global economic recovery’.
Throughout this year, there has been no optimism in any regions on economic growth.
Debts are rising in the Europe and budget deficits are widening in US government.
Japan is suffering from exports contraction as a result of rising yen while Asia is slowing down in overall.
China’s export is cooling down with lower manufacturing and properties have softened in the wake of arresting the illicit shadow banking system.
But yet, we will still see it through the year-end with probably higher price stability in both equity and commodity prices.
In our opinion, Obama will still grit his teeth for fighting to retain his presidential seat.
In eurozone, ECB president Draghi needs to prove his worth for the first year by ensuring the sovereign debts can be under control in 2012.
Thus, we reckon the year 2012 will wrap up in happy-ending for the financial markets.
But the thought of 2013 worries me to ponder further.
In fact, the survival of 2012 without genuine recovery in the first-world nations simply indicates a postponement of meltdown in the following year.
Therefore, it is good to cap a limit in your investment portfolio by liquidating them over this year-end for footing your shopping bills for Christmas.
Dar Wong is the Principal Consultant of APSRI with 23 years of trading experiences. The expressions are solely his own. He can be reached at dar@pwforex. com