Thursday, April 9

Currency market outlook


Fundamental outlook

US and China have signed the ‘phase one’ trade deal with China agreeing to purchase total US$200 billion goods and services in two years. Analysts said the tariff would remain a debatable topic as the truce deal seems fragile.

American consumer prices grew 0.2 per cent in December. Excluding fresh food and energies, core prices gained only 0.1 per cent, below forecast.

The impeachment procedure on President Donald Trump began on Thursday as Chief Justice and Senates swore in for impartial judgement. Hearing will commence in the coming week on Trump’s abuse of power and obstruction to Congress.

China’s GDP grew six per cent for the remaining quarter of last year, averaging 6.1 per cent gains in 2019. Industrial production rose 6.9 per cent in December, the highest recorded since March 2019. Premier Li Keqiang said China would continue to cut tax this year in order to boost recovery.

The pound fell last week as market traders anticipate the Bank of England to cut rates in view of the approaching Brexit. The British pound to dollar lingered around 1.30 as the trend fizzled out from 1.32 recently.

Technical forecast

US dollar/Japanese yen broke above 109.70 resistance last week and will rise higher. We foresee the trend will test 111 region if the dollar strengthens further. Support will emerge at 109.70 in case of a drawdown. A small range trading is expected.

Euro/US dollar dipped after the middle of last week. Resistance emerged at 1.1150 area but the trend is expected to move in a narrow range. We reckoned the trend movement will be contained from 1.10 to 1.1150.

British pound/US dollar saw strong resistance at 1.31 and we expect multiple selling pressure above this price range. We predict the trend is prone to go weaker but it could still remain within the 1.29 to 1.31 range. Traders are more cautious as the Brexit approaches.

Gold prices traded in a narrow range of below US$1,560 per ounce last week.

Traders are sitting on the fence, observing the outcome of the US-China trade deal signed in Washington and impeachment trial in the coming week. We foresee the range will be contained from US$1,530 to US$1,560 per ounce.

WTI Crude prices sat on US$58 per barrel support last week and traded in small movements. OPEC Secretary-General Mohammed Barkindo said oil prices carried an upside potential in 2020 and this could lift demand. We predict the trend will be compressed into a small range from US$58 to US$61 per barrel. Beware of unexpected news in the market that might affect the oil’s price movement.

Silver prices have been lingering around US$18 per ounce in uncertainty. We believe the market is quite versatile but waiting to move in either directional trend depending on fundamental news. We reckon the range will be contained from US$17.50 to US$18.50 per ounce with the potential to go in either direction.

Crude Palm Oil (FCPO) Futures on Bursa Derivatives dived last week due to rising ringgit. Profit sharing activity has occurred after three consecutive months of gain. April contract closed at RM2,843 per MT on Friday. The bears might fall lower to test RM2,750 per MT before bargain-hunting emerges. Resistance stays at RM2,950 per MT in case of a recovery.

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]