Fundamental outlook
US President Donald Trump alleged that China has been cheating in bilateral trades for 25 years. The comments came hours before Trump administration approved the sale of arms to Taiwan worth US$2 billion.
Federal Reserve chairman Jerome Powell reiterated that policymakers will make appropriate actions according to economic changes. He has not comment on monetary policy but said the trade war has triggered a global slowdown. Trump urged all US companies to look for alternative in doing business besides China.
The People’s Bank of China announced the lowering of prime rate from this month onwards in order to boost the economy. The aim is to stimulate the growth of smaller enterprises with lower cost of borrowings and boost China’s economy. China announced new tariff on US$75 billion of American goods. Some will commence in September while the remaining will begin in mid-December. Soon after the news release, stocks declined and gold rose in US’ market.
Japan-South Korea tension escalated due to the trade dispute between the two countries and after South Korea said it aimed to cancel the intelligence-sharing pact with Tokyo. The pact is a sharing deal on the military and missile activity from North Korea.
Italian Prime Minister Giuseppe Conte formally tendered his resignation, triggering a possible political turmoil in the near future. The debt-to-GDP ratio for the country is at 131 per cent, the highest in the eurozone after Greece.
Technical forecast
US dollar/Japanese yen fell on Friday after the Dow Jones market slid. We reckon a very strong resistance at 106.70 in market. Overall sentiment is prone in falling and testing the next support at 104.70 level. After that, we expect mixed trading in market.
Euro/US dollar has shown strong support at 1.1060. This week, we forecast the trend will climb and reach 1.1250 before resistance emerges. The market seems to be supported at 1.1060 and should trade in some recovery in the coming weeks. In the unlikely event of breaking beneath 1.1060 support, abandon your long-view.
British pound/US dollar recovered after the trend managed to stand above 1.212. This week, the trend is prone to rise and reach 1.245 before encountering profit-taking activity in the market. We presumed this is a recovery that will be short-lived before the Brexit date and huge sellers will be waiting on the market topside as the trend rises.
WTI Crude prices plunged from US$56 per barrel on Friday after the Dow market fell. We foresee the trend may fall and re-test US$51 per barrel should the bear emerge. The overall trend is weak and the range will be contained from US$51 to US$56 per barrel.
Crude Palm Oil (FCPO) Futures on Bursa Derivatives rose on a weekly basis as demand increased last week. November Futures contract settled at RM2,263 per MT on Friday. We predict the trend may retrace as the trade war has resurged. Support is identified at RM2,200 per MT with immediate resistance at RM2,280 per MT.
Gold prices jumped US$30 on Friday as fearful investors hope to seek a safe haven after China’s announced tariff increment on US imports. We foresee the first resistance will emerge at US$1,540 per ounce level but beware of piercing above this level as it will trigger a run-up in the market to US$1,580 per ounce.
Silver prices rose on Friday with gold demand. The trend will be strongly supported at US$17 per ounce while it is close to US$17.50 per ounce. Overall sentiments in silver prices is still robust and should be traded with plan to establish long positions whenever it retraces lower.
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].