Fundamental outlook
THE British government will introduce stricter restrictions in its ongoing effort to fight the surge in Coronavirus Disease 2019 (Covid-19) cases in the country. It also support two-third of salaries of employees to protect their jobs over winter. UK accused Huawei of collusion with the Chinese Communist Party and will remove the telco gear before 2027.
The US jobless claims rose 840,000 for the week ended October 3, above forecast. Claims have been remained above 800,000 since mid-March. The market still hopes that there will be a new US stimulus plan while Dow benchmark stands strong.
While the Democrats and Republicans still squabble over a Covid-19 financial stimulus bill of US$2.2 trillion, President Donald Trump only agreed to a US$1.8 trillion package and said he wanted a bigger bill than this amount to stimulate the economy. Analysts reckoned that this is a hint to win his support from the voters while Trump announced that he will resume campaign this week.
Federal Reserve chairman Jerome Powell said the support from Congress is vital in order to ensure a smooth road to recovery. The US economy’s growth continues to sink, tightening job markets for past six months.
European economies are facing a dire situation as the second wave of pandemic rages across the region. On Friday, European markets closed slightly higher in optimism from news of the US stimulus.
Technical forecast
US dollar/Japanese yen traded in a narrow range last week, capped below 106. We forecast the initial range will be contained from 105 to 106 region, However, breaking beyond this range will move into a new directional trend and need to be controlled with proper risk management.
Euro/US dollar showed a rising trend on Friday. We reckoned the market will be contained initially from 1.1750 to 1.19 in case of a slight fall in the dollar. However, beware of breaking beyond the aforementioned range as this could lead to a new headway.
British pound/US dollar pierced above 1.3 resistance on Friday. The market is very strongly supported at 1.295 to 1.3 now. We project a higher trend in market with 1.32 as our next target. Traders are reminded to observe risk control in case of falling back beneath the 1.3 benchmark.
Gold prices reversed up towards the weekend. The market sentiment will be firm and would likely trade from US$1,900 to US$1,960 per ounce as the dollar weakens. Overall, we expect the trend to be mixed but with more buying interest. Abandon your long-term view in case of falling below US$1,900 per ounce.
WTI Crude prices topped US$41.50 per barrel last week. The market has been doing range-bound trading for months from US$37 to US$42 per barrel with significant trend. We foresee the trend might climb slightly higher to test US$43 per barrel before profit-taking arises. Ahead of the US election, global investors are more focused on the dollar and US’ stocks instead of crude prices.
Silver prices reversed upwards and closed above US$25 per ounce on Friday. The trend is prone to climb higher as the greenback might weaken. In our opinion, the market prices will be contained from US$24 to US$26 per ounce with more buying interest in market. Abandon your long-term outlook in case the trend settles beneath US$24 per ounce.
Crude Palm Oil (FCPO) Futures on Bursa Derivatives traded above RM2,800 per metric tonne and reached RM2,900 per metric tonne last week. The market is making a strong recovery by following a reversal in crude prices. December Futures contract settled at RM2,914 per metric tonne on Friday. This week, we predict the trend will escalate higher to test RM3,000 per metric tonne level before profit-taking emerges. Downside support will have bargain-hunting interest at RM2,850 per metric tonne region.
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].