Fundamental outlook
THE World Health Organisation reported that on July 31, the number of Coronavirus Disease 2019 (Covid-19) cases exceeded 300,000, making it the highest recorded cases recorded in a single day.
US pending home sales grew 16.6 per cent in June compared with 44.3 per cent growth in the previous month. GDP for the second quarter (2Q) fell 32.9 per cent on an annualised rate.
US weekly claims for jobless benefits rose 1.43 million in the week ended July 25, reaching above one million cases for straight 19th week. The Federal Reserve held interest rate steady and reassured that there are supporting tools to weather the economic storm. The lending programme is expected to run until the end of this year.
Tension between US and China continued to escalate with the shut down of US’ consulate office in Chengdu, China a week after the Chinese consulate in Houston was ordered to shut down by the Trump administration.
China manufacturing index rose 51.1 in July, the highest in four months. On the other hand, Hong Kong’s legislative council election that is supposed to fall on September 6 has been postponed until next year. Authorities said this was due to the Covid-19 pandemic.
Gold prices rose to historical high at US$1,980 per ounce due to rising risk in the market. UK Prime Minister Boris Johnson delayed the easing of lockdown measures in UK.
Technical forecast
US dollar/Japanese yen pulled up on Friday and settled above 105. Analysts say this could be a window dressing activity on the last day of July. We expect the trend to thread sideways but limited to 107 resistance. Temporary support could emerge at 105.50 but risk control is advised in case prices dropped off this area.
Euro/US dollar has been climbing for more than a month but fizzled out at 1.19 on Friday. We reckoned the trend might begin to falter as the dollar is prone to recover. We predict the range will be contained from 1.165 to 1.19 and would likely trade in lower demand. Profit-taking might begin soon.
British pound/US dollar could not challenge strong resistance at 1.32 on Friday. The trend could see profit-taking activity and trade in mixed sentiment from 1.2950 to 1.32. We expect many sellers will ambush the topside range upon a pull-up retracement. Beware of the dollar recovering against the European currency in August.
WTI Crude prices did not move much last week despite the technical pattern revealing some selling signs. We retain our view on the market range from US$39 to US$42 per barrel but beware of falling beyond the aforementioned range. The dollar could recover and trigger a decline in crude demand.
Crude Palm Oil (FCPO) Futures on Bursa Derivatives traded lower as traders took profit last week. Traders are worried of waning demand in the coming months as foreign trading reduced. October Futures contract settled at RM2,677 per MT on Friday. We identified strong resistance at RM2,720 per MT but falling beneath RM2,550 per MT will initiate a new bearish sentiments. Beware of crude trend in the coming weeks as the dollar tend to strengthen.
Gold prices slowed its ascend last week but the prices moved near to US$2,000 per ounce benchmark. It is crucial to observe the dollar’s direction before making a call on the gold’s trend. Based on market sentiments, we expect the market might be prone to correction soon for technical digestion. The overall range could be from US$1,920 to US$2,000 per ounce.
Silver prices traded sideways last week but limited beneath US$26 per ounce level. We target the range to be contained from US$23 to US$26 per ounce while the movement trade in mixed activities. The bullish sentiment might slow down temporarily and beware of a drop below the aforementioned range.
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].