Fundamental outlook
UK secured a free-trade agreement with Japan, making it the first major deal achieved post-Brexit. The agreement is expected to see an increase by an estimated 15.2 billion pounds in bilateral trade. UK’s economy grew 6.6 per cent in July on a monthly basis.
US Department of Commerce threatened to sanction Chinese chipmaker SMIC while labeling the tech-company as a threat to US national security. Chinese Government retaliated by calling the Trump administration a “hegemony”.
US weekly claims totalled 884,000 in the week ended September 5, higher than forecast. Total claims reached 13,385 million to date.
Japan’s GDP for 2Q fell 28.1 per cent, worse than the initial estimate. The cabinet is still in the midst of finding a new prime minister after Shinzo Abe declared his intention to resign due to heath reasons. Last Thursday, European Central Bank policymakers retained the interest rates. ECB chief Christine Lagarde has hinted strong euro is favoured but will monitor closely.
Crude prices have been dropping after Saudi cut prices to international buyers. The spokesman of Saudi says there are too many uncertainties in market and demand has been volatile since China is the largest import of crude oil.
Technical forecast
US dollar/Japanese yen has been rattling in a small range for many days. The market will be largely contained from 105 to 107n while waiting to make a breakthrough. Traders are advised to exercise caution in controlling risk due to uncertainties in the market.
Euro/US dollar formed a head and shoulder formation last week. The market is resilient at 1.19 with a lot of selling pressure. We reckoned the trend will be initially trapped from 1.175 to 1.19. The technical pattern might be more prone to fall but still need prudence in exercising caution.
British pound/US dollar has shown resistance at 1.35 while strong selling pressure has built up above 1.32. The trend is temporarily supported at 1.275 and might rebound to test 1.305. Sideways swing is expected to emerge but it could break beneath 1.275 support.
WTI Crude prices saw weak demand on the technical chart. We project the trend might head down further while resisted at US$39 per barrel. There is a possibility to see the market going down to US$30 per barrel if the US dollar index (USDX) recovers further this week.
Crude Palm Oil (FCPO) Futures on Bursa Derivatives traded in a slight correction due to slower export demand. The decline in crude prices is also another reason to affect the recent uptrend. November Futures contract settled at RM2,811 per metric tonne on Friday. There is strong selling pressure above RM2,850 per metric tonne. We foresee the market might head down to test RM2,700 per metric tonne.
Gold prices have been trading in a tight range from US$1,920 to US$1,960 per ounce recently. We foresee the market might nosedive to below US$1,900 per ounce. Traders are reminded to prepare risk control in case of a bearish direction. A rise above US$1,960 per ounce could require you to abandon your short-term view.
Silver prices have been largely trading from US$26 to US$27 per ounce. However, the technical pattern is similar to gold prices that indicates that it is prone to move southward. We recommend to observe for a downtrend with risk control set at US$27.50 per ounce. Downside target might reach US$25 per ounce before Friday.
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].