Fundamental outlook
President Donald Trump complained about the slow progress in the trade talk with China and slapped new tariffs on US$200 billion worth of Chinese imports. The Trump administration also threatened to impose tariffs on a new list of Chinese goods worth US$325 billion.
Last Friday, China‘s Vice Premier Liu He visited Washington again to continue the trade talk despite the tariff theats by US’ Government. Back in Beijing, the Chinese Government said they were disappointed to hear about US’ tariff action but it said it would retaliate with trade tariffs in due time. On Friday, the Dow markets recovered after the trade talk resumed and traders expect positive outcome in the coming weeks.
UK’s economy grew 0.5 per cent in the first quarter, matching forecast. Industrial production gained 0.9 per cent, maintaining its positive growth for the third consecutive month.
The US-Iran tension increased as the Pentagon sent warships to the Middle East. Crude prices fell due to the US-China trade rift. Gold demand stabilised as a safe haven from the current market volatility.
Technical forecast
US dollar/Japanese yen slid last week as we predicted. The market was supported at 109.50 and would likely to recover this week. We foresee the trend will move in a tight range from 109.50 to 111.00 this week amidst mixed trading. Risk control is advised in case of extending beyond the aforementioned range.
Euro/US dollar sat tight on 1.1150. This week, we reckoned the trend will be supported at 1.1180 and is prone to surge higher. We forecast 1.1330 but there is a possibility of a stronger rise. We recommend traders to observe the dollar index (USDX) for a potential inverse relationship to the euro trend.
British pound/US dollar has shown strong potential in falling after the traders gradually lost interest in the pound. The market topped off 1.3180 recently and will likely to continue to fall in the near future. We foresee selling pressure will build up at 1.31 in case of a temporary pull-up. Support is expected at 1.2880 and we expect the overall trend to fall.
Gold prices traded in a very narrow range from US$1,275 to US$1,290 per ounce. This week, it will depend largely on the dollar’s trend. However, the downside support is at US$1,265 per oz. On the other hand, the upside potential is more aggressive if the trend pierces above US$1,290 per oz and will likely reach US$1,310 per oz.
WTI Crude prices traded flat from US$61 to US$62 per barrel throughout last week. The market refuses to fall despite some selling forces triggered by the resurging US-China trade war. Tensions in the Middle East weigh on crude prices. This week, we would expand our target range from US$59 to US$63 per barrel.
Silver prices traded largely from US$14.70 to US$15 per oz last week. We reckoned the support is very resilient at US$14.60 per oz. On the other hand, traders are waiting for the surge above US$15 per oz that carries the potential to drive up to US$15.50 per oz once the bulls gather strength. By observing the XAU/XAG ratio that is prone to slide from current 87 high, we expect the silver is soon to outrun the yellow metal’s gains.
Crude Palm Oil (FCPO) Futures on Bursa Derivatives maintained sluggish sentiment in the market. The partial reason for FCPO’s weakness is the lower demand for edible oils and US-China’s trade war. We reckoned the reversal trend will occur only after the rollover week. July Futures contract closed at RM1,984 per MT on Friday and will prepare to rollover to August contract as active month on May 15. This week, we expect the support will emerge at RM1,950 per MT and prone to regain recovery at RM2,020 per MT area.
Dar Wong has 30 years of trading and hedging experiences in global financial markets. The opinion is solely his own. He can be reached at [email protected]