Thursday, October 22

Trump accepts Tik Tok, WeChat deal

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Fundamental outlook

PRESIDENT Donald Trump has agreed with the new Oracle-Tik Tok deal. Trump initially initiated a block on downloads for Tik Tok and WeChat.

WTO ruled that US violated the international trade rules in 2018 by slapping additional tariffs on more than US$200 billion Chinese exports.

US initial claims reached 860,000 for the week ended September 12, slightly lower than forecast. Job market remained sluggish in US. Fed policymakers retained interest rates. Chairman Jerome Powell hinted that there would be no interest hike for years.

The Bank of England retained interest rates at at 0.1 per cent and asset purchase programme at 745 billion pounds. However, policymakers are exploring the possibility of negative rates as a tool to stimulate an economic recovery.

OPEC+ members met for a virtual meeting to discuss production cuts to encourage oil demand. The group agreed previously to cut a total 7.7 million barrels daily from August to December due to weak demand. However, analysts foresee no further cut will be introduced.

Technical forecast

US dollar/Japanese yen fell last week. The trend was weak and settled at 104.50 on Friday. We foresee the trend could be weak and thread sideways from 104 to 105.50. Traders are hedging the yen currency due to uncertainties in the dollar’s movement..

Euro/US dollar traded in uncertainty and hovered at 1.18. We expect the initial range will be contained from 1.1750 to 1.19 before breaking beyond consolidation. It will depend largely on the dollar’s direction.

British pound/US dollar traded in mild recovery last week. The market tends to be resilient at 1.30 and could head downwards in the coming week. We project the trend will be contained from 1.28 to 1.30 but beware of breaking beyond this range. Risk control is advised as there might be some volatility on post-Brexit news.

WTI Crude prices returned to US$40 per barrel on Friday on market news of a possible supply cut. We reckoned the trend will be contained from US$38 to US$42 per ounce in mixed sentiment. Market interest has reduced over the months as market movements have narrowed. Traders are reminded to be cautious.

Crude Palm Oil (FCPO) Futures on Bursa Derivatives climbed further in optimism. Strong crude prices helped lift FCPO demand, decreasing stockpile.

The market bulls might continue to rise above RM3,150 per metric tonne and reach RM3,200 per metric tonne before retreating from possible profit-taking at the end of the week. Strong support is seen at RM2,900 per metric tonne.

Gold prices traded around US$1,960 per ounce last week. The market is trapped in uncertainty with no indication on its movement.

The dollar factor could move gold on an inverse correlation. The overall range is contained from US$1,920 to US$1,980 per ounce as the movements swing within this price window.

Silver prices have been trading around US$27 per ounce with the possibility of declining. We expect the trend to test US$26 per ounce support.

However, breaking beneath this support level will cause some panic selling and the possibility of it reaching US$25 per ounce. Resistance could remain strong at US$27.50 per ounce.

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]