ECB hints of more stimulus

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Fundamental outlook

THE European Central Bank (ECB) retained its monetary policy during last week’s meeting. ECB’s president Christine Lagarde said more stimulus could be issued in December to help weather the tough winter season in the wake of the worsening Covid-19 outbreak. To date, policymakers have rolled out the Pandemic Emergency Purchase Programme (PEPP) that will last until June of 2021, amounting to 1.35 trillion euros.

The Dow market lost about 1,500 points throughout the whole week after the pandemic crisis reached another record high. President Donald Trump claimed that the worsening outbreak is a media conspiracy.

US order for core durable goods grew 0.8 per cent in October and higher than forecast. GDP for Q3 seasons grew 33.1 per cent. Jobless claims ended October 24 fell to 751,000, the lowest in the past six months.

Germany and France have announced stricter restrictions to curb the Covid-19 outbreak. Most public places will be under lockdown for a month starting November.

Crude oil prices fell last week and closed on Friday at US$35.79 per barrel, the lowest since June. Both crude and Dow market plunged as Covid-19 cases rose drastically in the US.

Ant Group raised US$34.5 billion for its IPO, making it the biggest public listing in the world. The company will trade on November 5 in Hong Kong and Shanghai simultaneously.

Technical forecast

US dollar/Japanese yen traded sideways after hitting 104 support. Due to the recovery in the dollar, we foresee the trend could trade higher this week while contained within 104 to 105. Traders are reminded to safeguard their position.

Euro/US dollar declined last week. We expect a support at 1.16 which could be tested. However, we reckoned the trend might reach 1.155 before bargain-hunting emerges. The overall trend is expected to be contained from 1.155 to 1.17. Be cautious of an unexpected breakout on the downside trend.

British pound/US dollar traded in mild bearish trend last week. We foresee resistance could emerge at 1.30 and likely drawdown. Downside support lies at 1.285 as our first target. If the trend fails to hold, it could reach 1.27. Traders should practice caution in case of price adversity.

WTI Crude prices declined last week as we predicted. However, the bears have held tight and closed at a four-month low on Friday. We expect some pull back in the market to US$37 to US$38 per barrel before declining further. In our opinion, piercing beneath US$35 per barrel might effectively drive lower to US$31 per barrel. The strong dollar will be a catalyst to most commodity prices this week.

Crude Palm Oil (FCPO) Futures on Bursa Derivatives hit a double top at RM3,100 per metric tonne before declining. The market trend is more subjective to global fundamentals now rather than supply/demand. January Futures contract settled at RM3,007 per metric tonne on Friday. This week, the trend might start to head down as global commodity prices decline. Our target is at RM2,870 per metric tonne in case of a drawdown. Risk management is advised at RM3,100 per metric tonne level.

Gold prices fell towards the weekend as the dollar recovered last week. We project the trend could be contained from US$1,850 to US$1900 per ounce in mixed sentiment. However, be prepared to see a possible breakthrough at US$1,850 per ounce in case of a stronger dollar. Our secondary support lies at US$1,800 per ounce.

Silver prices has been holding pretty well. We expect silver could trade sideways from US$22.50 to US$24.50 per ounce range in mixed sentiment. In the event of breaking beneath US$22.50 per ounce level, the bears will probably land at US$22 per ounce as our next support area that could trigger some bargain-hunting activities.

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].