Fundamental outlook
US Government pulled out of talks with Europe on matters concerning an international digital tax on tech giants. Germany, France, Italy and UK are mainly affected and stunned by the information issued by US Treasury Secretary Steve Mnuchin. US retail sale made 17.7 per cent record jump in May, boosting stock markets on Tuesday.
Jobless claims reached 1.5 million for the week ended June 13, rising above one million filings for 13th straight week. Federal Reserve reassured policymakers that it would buy individual corporate bonds to support market. The Department of Commerce said US firms could work with Huawei on setting standards for the next generation of technologies.
The International Monetary Fund (IMF) expected the global economy to experience its worst financial crisis. The World Health Organisation (WHO) warned that the Covid-19 pandemic is ‘accelerating’ and in a new and dangerous phase as countries across the world begin to ease their lockdowns while there have been reports of a resurgence of the coronavirus in Beijing. WHO said it is wary of a possible second wave in autumn and winter.
Bank of England added 100 billion pounds into its bond purchase programme, bringing the total to 745 billion pounds. Economists doubt the interest rates will turn negative.
Technical forecast
US dollar/Japanese yen traded in a small range last week while waiting for a breakout. We expect the trend to be contained initially from 106.50 to 108. Technical patterns are more prone to falling in the coming weeks with strong resistance at 108. Traders should exercise risk control.
Euro/US dollar declined as the dollar recovered. We expect the market to be supported at 1.1150 and move into consolidation. The range is expected to be tight from 1.1150 to 1.1250 until the movement breaks out. Another good support is identified at 1.1050.
British pound/US dollar was bearish last week. The market might continue to slide further with next lower target set at 1.22. The overall range is expected to be contained from 1.22 to 1.25. The weekly-chart is also exhibiting a head start on a bearish trend.
WTI Crude prices rose above US$39 per barrel before the weekend. The market reversal was unexpected but still stayed below US$40 per barrel resistance. We expect the trend to fizzle out at US$40 per barrel and head down to US$35 per barrel. Otherwise, an unlikely rise above US$40 per barrel may lead prices to test US$45 per barrel.
Crude Palm Oil (FCPO) Futures on Bursa Derivatives shot up on Friday. The market was probably affected by the zero-tax rate for export inventory. September Futures contract settled at RM2,475 per MT. We expect the market to sit tight on RM2,420 per MT and continue to trade higher. Possible target is at RM2,600 per MT.
Gold prices spiked on Friday after the Dow fell. We expect the market fund might shift into yellow metals once prices break above US$1,760 per ounce. In case the trend fails to rise above this resistance level, there is a possibility of a downturn to US$1,700 per ounce. Traders are advised to stay observant for an uptrend opportunity.
Silver prices have been hovering at US$17.50 per ounce. We expect prices to break below US$17.30 per ounce that will lead to a southward direction. On the other hand, it is possible to see a bullish trend that might drive up to US$18.50 per ounce. Breaking above this target is a sign of new uptrend in silver prices.
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].