Wednesday, November 13

Bolten leaves Trump administration

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Fundamental outlook

US National Security Advisor John Bolton left the Trump administration on Tuesday. Both President Donald Trump and Bolton could not see eye-to-eye on state affairs. Crude prices fell after the news as Bolton has been well known to oppose Iran.

Trump said the US government will delay the new tariffs on US$250 billion Chinese goods until mid-October due to China celebrating its 70th National Day. China has prepared to trade soy beans and agricultural products in exchange for the good favour. Trump commented that he might consider an interim trade deal with China.

The European Central Bank (ECB) announced a new stimulus of 20 billion euros monthly on massive buying bonds in order to support the ailing economy. The deposit rate is cut by 10bps to minus 0.5 per cent on savings account. Market analysts reckon this could be a long run stimulus.

UK Parliament has been suspended and will be closed for five weeks before re-opening in mid-October. Prime Minister Borris Jonson vowed to lead UK to a Brexit regardless the situation. The pound rose to a seven-week high while on new hopes of a possible breakthrough in the Brexit deal. Johnson is due to meet the European Union Commission on September 16 and the EU leaders on October 17 and 18.

Saudi Aramco has announced its listing for IPO on the home exchange in the near future then followed by a second listing sometime next year in the UK or US. Iraq agreed to cut production in-line with the OPEC proposal.

OPEC leader Saudi Arabia reiterated that a deeper cut on global oil production will be start in December. The target is to reduce 1.7 million barrels per day from the current 1.2 million reduction now.

Technical forecast

US dollar/Japanese yen regained last week. The market is still in a mild uptrend and it might move into a sideways consolidation this week. We foresee the movements will range from 107 to 109 with interest prone to pick bottom. Risk control is advised in case of breaking beneath this support.

Euro/US dollar traded higher after the announcement of a stimulus. The trend will likely move in firm sentiment with support rising at 1.1020 area. Overall range is expected to be contained from 1.1020 to 1.1170 while trading in narrow prices. The real impact of stimulus is not known yet until we move into the fourth quarter (4Q).

British pound/US dollar closed slightly above 1.25 after a sudden surge on Friday. We forecast the trend might climb further but resistance will emerge in 1.26 to 1.265. The downside is supported at 1.24 level in case of a drawdown. Market interest will lean to picking bottom over the short-term period until the British Parliament re-opens in mid- October.

WTI Crude prices fell off US$58 per barrel last week after the resignation of US National Security Advisor Bolton. We expect the support will be tested at US$53.50 per barrel before rebounding. The overall range is likely contained from US$53.50 to US$57.50 per barrel with some bargain-hunting emerging from the aforementioned bottom.

Crude Palm Oil (FCPO) Futures on Bursa Derivatives declined slightly last week. December Futures contract closed at RM2,223 per MT on Friday. The trend will be supported at RM2,200 per MT and would likely recover to RM2,280 per MT region if open-interest increases.

Gold prices lingered around US$15,00 per ounce throughout last week and caught many traders off guard. We predict the trend will be prone to fall further. Resistance is expected to emerge at US$1,500 to US$1,510 per ounce in case of a recovery. Falling beneath US$1,475 per ounce will expose the potential to slide further to US$1,450 per ounce level.

Silver prices have begun dropping on Friday. The trend is well resisted at US$18 per ounce for the time being and prone to head down further in the coming week. Support is identified at US$16.80 per ounce in case of further drawdown. However, we expect the market will lay a strong foundation at this bottom in September before the next uptrend resumes in October.

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]