Traders observe outcome of US-China talk

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Fundamental outlook

TRADERS are observing the outcome of the US-China trade talk which could lead to new market movements by the end of April. US and China are in the midst of a trade talk and one of the terms to the trade agreement between the two countries was to allow China’s government to terminate all support in state enterprises for overseas trade competition.

Chinese leaders disagreed to this term.

US retail sale soared 1.6 per cent in March, the highest since September 2017. Market players are waiting for the major banks to announce their first quarter results. Dow Jones market returns bullish, closing above 26,500.

China’s telecommunication giant Huawei proposes to sell 5G chips to Apple for iPhones, making the biggest development in the tech market. For the last two years, Apple has been engaging in a lawsuit with Qualcomm while Intel does not have a 5G modem or relevant equipment until 2020. Last week, Apple and Qualcomm reached a settlement that will end the lawsuit.

China grew 6.4 per cent in 1Q, better than forecast, after Chinese Government implemented stimulus measure to counter economic dents caused by the US-China trade war. Industrial production soared 8.5 per cent in March on a yearly basis, the best growth in four and a half years.

The European Union threatened to impose tariff on US import worth US$20 billion after WTO ruling reported that US failed to end illegal support for Boeing Company. Both parties are open to a trade talk but France objects to EU–US negotiation unless President Donald Trump agrees to a climate deal.

Technical forecast

US dollar/Japanese yen stayed at 112 last week and traded in small ranges. We foresee the trend will correct but thread in narrow range from 110.70 to 112.20. Breaking beyond either direction will initiate a new directional headway.

Euro/US dollar traded in a narrow range last week but in mild bearishness due to the firmer dollar at 1.12. We expect the trend to bounce off this week. Movement is expected to be contained from 1.1200 to 1.1320.

British pound/US dollar hovered at 1.30. We expect it to be contained from 1.2950 to 1.31. The Brexit matter has cooled off for a while. The market is still looking for a direction.

Gold prices fell last week to US$1,275 per ounce as the dollar rose. We forecast the prices will be supported at US$1,265 per oz before staging a rebound. Overall range is contained from US$1,265 to US$1,295 per oz.

WTI Crude prices were flat at around US$64 per barrel last week. We hold opinion of further rise in WTI Crude prices in May when the greenback recedes. This week, we foresee the trend will be contained from US$62 to US$65 per barrel.

Silver prices hovered around US$15 per oz last week. We forecast the trend will recover and range from US$15 to US$15.50 per oz this week. The silver is rather uncertain over the short-term, depending on the gold price movements.

Crude Palm Oil (FCPO) Futures on Bursa Derivatives traded slightly higher. Demand came from China’s commitment to purchase more palm oil and also help Malaysia to increase yield. July Futures settled at RM2,190 per MT but resisted at RM2,220 per MT level. This week, we predict the trading range from RM2,140 to RM2,240 per MT.

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 [email protected]