Fundamental outlook
A Japanese dual oil-tanker was attacked in the Gulf of Oman recently while Japanese Prime Minister Abe Shinzo was in Iran. US President Donald Trump’s administration blames it on Iran but it has been wholly denied by Iranian Government. Tensions escalated in Middles East as Gulf countries suspect the work of Iranian naval force. However, the survivers of the attack say the ship was hit by a projectile, not a torpedo.
The US Secretary of Finance Steven Mnuchin said Trump will be happy to impose more tariff on Chinese goods if no further deal is reached with Chinese leaders. Trump also threatened more tariffs on Chinese imports if Chinese President Xi Jinping does not attend the G20 meeting. But on Friday, President Trump changed his comment and downplayed the threats on China by saying it doesn’t really matter if he can meet Chinese President Xi in the G20 meeting.
China trade surplus added USD41.7 billion in May and higher than forecast. Till date, China is reserving all replies towards US threats. Market investors are observing the Dollar trend as a leading catalyst to move Gold prices now.
British GDP fell 0.4 per cent in April on a monthly basis. Boris Johnson won the first round of the leadership vote in UK and has been favoured to be the next prime minister by the Conservative Party. Luxembourg Prime Minister Xavier Bettel commented there would be a no-deal Brexit regardless of who becomes the next British prime minister.
Technical forecast
US dollar/Japanese yen traded in a narrow range last week while hovering around 108.50. This week, traders will be watching the FOMC outcome for a potential dollar movement relatively to the yen. We reckon the initial range to be 107.50 to 109 while waiting for a break in either direction.
Euro/US dollar topped off recent highs at 1.1350 and closed at 1.12 on Friday. This week, we forecast trading will persist from 1.1150 to 1.13 until we see a clearer direction in the dollar’s movement. The eurozone is beginning to sink into sovereign debt as Italy is resolving its debt repayment with the EU policymakers.
British pound/US dollar resumed into a bearish trend last week as investors began retreating from UK. The pound may decline in the coming weeks due to waning confidence in the market. We forecast the trend will initially trade within 1.2550 to 1.27. In our opinion, breaking beneath the 1.2550 support could be detrimental to the demand of the pound.
Gold prices touched a 14-month high at US$1,358 per ounce before retreating. The trend might travel in either direction based on the outcome of the FOMC meeting. The initial range is expected from US$1,330 to US$1,360 per oz. Risk control is advised in case of adversity.
WTI Crude prices stood above US$50.80 per barrel. Demand is rising due to the Middle East tension. This week, we presume the range will be contained from US$50.50 to US$54 per barrel. The market is not ready for a recovery as the fund is still engaged in the gold instrument.
Silver prices shaved off the bullish sentiment on Friday after the dollar climbed. We reckon the market will trade in a narrow sideways movement from US$14.60 to US$15.10 per oz in mixed trading actions. We are still optimistic to pick bottom in caution whenever the trend prices falls below US$15 per oz level.
Crude Palm Oil (FCPO) Futures on Bursa Derivatives has been trading in low demand for months. FCPO lingered at RM2,000 per MT last week as the ringgit traded in weak demand. August 2019 Futures closed at RM2,008 per MT on Friday and will rollover to September 2019 in the coming week. Technically, we predict the range will trade narrowly from RM1,950 to RM2,050 per MT this week amid a whipsaw movement.
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]