UK prepares final plan for Brexit deal

0

Fundamental outlook 

UK Parliament is submitting a final proposal for a Brexit deal to keep Northern Ireland as a single market for trading goods but leaves the customs union. It awaits approval from Brussels.

US President Donald Trump is facing an impeachment enquiry from the House. He further calls for China to open an investigation on former Vice President Joe Biden and his son. The US ISM manufacturing index grew to 47.8 in September, the worst recorded in a decade. The trade war initiated by Trump administration weighed on economic growth and hurt the bilateral trades with China and the European Union (EU).

On Friday, America added 136,000 jobs in September while the jobless rate slid to 3.5 per cent, the lowest in 50 years. Dow market recovered before the weekend after it fell earlier last week.

Arbitrators from the World Trade Organisation (WTO) granted the US Government the right to levy tariffs on 7.5 billion euros worth of EU goods which it deemed illegal subsidies granted to the aircraft maker, Airbus, which is also jointly supported by Germany, France, Spain and the UK. The EU Governments reject the verdict and vowed to retaliate against the US on a similar trade case.  China’s Caixin manufacturing index grew 51.4 in September, the highest recorded in 12 months. Russian President Vladimir Putin confirmed that Russia is helping China in the development of an anti-missile system that is currently available in the US and Russia.  Traders are watching the pound very closely as the Brexit dateline approaches.

Technical forecast  

US dollar/Japanese yen moved within the expected range predicted last week. The market is still uncertain but stronger resistance has emerged at 108.50. We forecast the trend will be contained from 106 to 108.50. Traders are advised to be wary.

Euro/US dollar rose slightly last week due to the falling dollar. We reckoned the ascending trend will encounter strong resistance at 1.1050. The overall trend is expected to be contained from 1.09 to 1.1050 for the time being. Beware of unexpected movement as the dollar can fluctuate in line with US political news.

British pound/US dollar has been moving in a tight range below 1.24. As UK approaches the Brexit dateline, traders are losing confidence in Prime Minister Borris Johnson. The pound could plunge starting this week. While resistance is strong at 1.2350, the bears might take control and head south with the potential to reach 1.20 anytime soon. WTI Crude prices tested the US$51 per barrel support again last week.

The market bounced off and might recover. We reckon the alternate pace between gold and WTI will apply. The trend would likely trade higher from US$51 to US$56 per barrel due to short-covering positions in the market.

Crude Palm Oil (FCPO) Futures on Bursa Derivatives traded in a tight consolidation last week. The range was mainly contained from RM2,130 to RM2,180 per MT while supported above EMA200 line. December Futures contract closed at RM2,148 per MT on Friday.

The range could stay indecisive, in mixed sentiments. However, breaking in either direction is possible with the extension reaching RM2,050 per MT or RM2,240 per MT once it pierces beyond the initial range.

Gold prices made a quick recovery from US$1,460 to US$1,520 per ounce last week but the overall trend is still caught in a sideways trend. The trend could remain and move inside the same range but it could be prone to trade in the lower region. The alternate pace of the gold and crude market still applies as the Dollar Index (USDX) still lingers above 98.

Silver prices traded in sideways consolidation from US$17 to US$17.70 per ounce last week. The trend could fall again in the coming week with resistance building up above US$17.80 per ounce. The range is expected to be contained from US$16.80 to US$17.80 per ounce.

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].