Fundamental outlook
US President Donald Trump warned Iraq with a sanction after the Iraqi Parliament decided to defend the sovereign right to expel US troops. The act comes after US drone attacked and “assassinated” Iran’s military leader General Qasem Soleimani in Baghdad.
Last Wednesday, Iran shot more than a dozen of missiles at US military bases in Iraq but US media reported no casualties. Trump played down the strike. However, Japanese media reported 20 casualties have been found on the sabotaged sites.
Oil prices rose after the US–Iran tension escalated following the death of General Soleimani. However, market prices fell towards weekend to US$60 per barrel region as demand weakened. Iran goes through national mourning and vowed vengeance against the US Government.
Meanwhile, China encouraged US to seek a dialogue with Iran instead of using brute force to resolve the dispute. Dow Jones benchmark made new record high on last Thursday while gold and crude prices sank.
On Friday, US payroll added 145,000 jobs in December. Unemployment rate remained steady at 3.5 per cent. Dow markets was above 29,000 and fell on Friday as profit-taking emerged before the weekend.
Technical forecast
US dollar/Japanese yen rose to 108. This week, market is expected to see immediate resistance at 109.70 depending on the movement of the dollar. Breaking above the 109.70 resistance will test 110.70, otherwise the trend might correct at 108.50.
Euro/US dollar traded in downtrend as the dollar rose last week. We foresee the market will be supported at 1.1070. However, the topside potential is limited at 1.1070 as the trend will thread in a narrow movement. Swing patterns are likely to occur and traders are advised to control risk in case the prices extend beyond the consolidated range.
British pound/US dollar moved within 1.2900 – 1.3200 as predicted. Traders are grasping taking the opportunity to sell from high side whenever the market pulls up. We reckon the market sentiment will remain unchanged and prone to fall as we move towards end January for the Brexit.
WTI Crude prices plunged from US$65 per barrel mid last week to US$60 per barrel as funds rushed back into Dow market. The dollar recovery is another factor that has added pressure on commodity prices. We foresee the range will be sideways from US$58 to US$61 per barrel amid the weak trend.
The market is subject to a bearish trend once it submerges below US$62 per barrel. Crude Palm Oil (FCPO) Futures on Bursa Derivatives traded sideways amid profit-taking activity last week. Trend is rather inactive as traders have just started off the New Year.
However, buying interest might kick-in again after the rollover period in January. March contract closed at RM3,136 per MT on Friday. We project the trend will continue to thread from RM3,020 to RM3,160 per MT range but piercing above the resistance will probably aim for RM3,200 per MT target.
Gold prices was above US$1,600 per ounce last Wednesday and fizzled out. The market is likely to lose steam as funds might rush back to stock indexes. We project the range to be US$1,530 to US$1,580 per ounce but likely in a downward retracement. Gold is becoming directly inverse to the Dow benchmark for the movement of the fund.
Silver prices whipsaw last week by piercing above US$18.50 per ounce on Wednesday but dived below US$18 per ounce unexpectedly the following day. The market will be contained from US$17.70 to US$18.50 per ounce in uncertain swinging patterns. Traders are advised to take control of positions in case of erratic price movements.
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]