Wednesday, December 1

US Government shutdown sets new record, economic losses rising


Fundamental outlook

THE US Government has shut down since December 22, making it the longest recorded lapse in Federal funding. Economists say the cost of Government’s dormancy for the last two weeks could create a total economic loss of US$6 billion, exceeding the cost of building the border wall.

Last Tuesday, President Donald Trump spoke on US national TV and cited the possibility of declaring a national emergency, bypassing the Congress veto to build Mexican border wall. The declaration by the President could activate the building fund.

The dollar Index (USDX) has dove below 96, heading towards 95. The trade talks between US and China has begun and the talks aim to resolve the trade friction between the two countries during the truce period. Commodity prices are recovering on demand while bilateral import/export ties resumed between the countries.

The Organisation of Petroleum Exporting Countries (OPEC) confirmed the cut in production in hopes of lifting oil prices. Recent reports state that Saudi Arabia controls more than 260 billion barrels of oil held in reserves. The Kingdom plans to list an IPO of five per cent of its physical stock but it has delayed it to 2021. We forecast the crude and gold prices to be well supported in January while the dollar is still weak.

Technical forecast

US dollar/Japanese yen traded sideways last week. Traders are hedging their risk into the yen as a safe haven while the dollar slightly weakens. This week, we reckon the trend will be threading from 106.50 to 109.50 with volatile movements as traders adjust their position in mixed sentiments.

Euro/US dollar traded sideways while capped under EMA200 line averaging across 1.1580. This week, we forecast the range will be contained from 1.14 to 1.155 area. There is a possibility that the euro will lean on the inverse strength of the dollar. Hence, we foresee the euro could behave in firm sentiment in the coming weeks as the dollar softens during the trade deal talk.

British pound/US dollar is trading in firm sentiments but has not gathered strong demand. We foresee the trend will be resisted at 1.29. On the downside risk, some support is expected at 1.267 to 1.27. We expect the trend to be cautious in light of the Brexit negotiations.

Gold prices traded in very limited range under US$1,300 per ounce last week. We expect gold to be top-ish and strong selling interest to emerge at US$1,300 to US$1,310 per oz.

WTI Crude prices are temporarily hitting a resistance at US$53 per barrel. This week, support could emerge at US$48 per barrel in case of drawdown correction. Bargain-hunting will be seen at this region as the USDX remains below 96 level.

Silver prices remained at US$15.80 per oz and begun to thread sideways. This week, we foresee the trend could move sideways from US$15.40 to US$15.80 per oz and it could trade in either direction. In our opinion, the dollar’s strength will play a key role in affecting the silver’s trend on an inverse correlation.

Crude Palm Oil (FCPO) Futures on Bursa Derivatives encountered resistance at RM2,200 per MT as general energy and food oil pose top-ish price patterns. This week, we expect a roll-over below RM2,200 per MT but a rise above this benchmark is possible after April’s contract becomes the new active trading month.

Dar Wong has 30 years of trading and hedging experiences in the global financial markets. The opinion is solely his own. He can be reached at