Wednesday, June 16

Dow Jones closes at a record-high as stimulus package approved

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Fundamental outlook

US House Democrats passed the US$1.9 trillion stimulus package last Wednesday, allowing President Joe Biden to sign a bill before the unemployment benefits expire on March 14. The overall sentiment in US stock market has recovered amid expectations of fresh monies flowing into equity markets.

US Dow market soared and closed at a fresh high on Friday, reaching 32,777 points. The S&P 500 Composite also closed at record high, clocking 3,943 points. The fear of inflation has waned as general sentiment celebrate the forthcoming stimulus.

US Secretary of State Antony Blinken and national security advisor Jake Sullivan will meet the People’s Republic of China’s Yang Jiechi, a member of the Communist Party’s top decision-making body, and Wang Yi, the foreign minister, at Anchorage, Alaska on March 18.

European Central Bank pledged to increase its bond purchases “significantly” next quarter. The Pandemic Emergency Purchase Programme, or PEPP, will remain unchanged at a total of 1.85 trillion euros until March 2022.

 

Technical forecast

US dollar/Japanese yen traded in firm sentiment last week. We forecast the trend will continue to climb while sitting on 108.50 support. Topside target is at 110 this week with some resistance in the swinging dollar. Expect of some selling pressure at 110 to 110.50 area.

Euro/US dollar exhibited strong support at 1.1840 last week while the trend rebound. We find no clue in the trend except the range from 1.1840 to 1.2040. Traders are reminded to be cautious and exercise risk control due to the potential of the dollar’s movement in tandem with the announcement of the US stimulus.

British pound/US dollar saw a bearish sign on Friday close. The day-chart pattern showed strong resistance at 1.3950 to 1.40 and the trend might fall this week. The downside target lies at 1.38 but beware of breaking beneath this level. Be prepared of some volatile movement iand risk control is advised.

WTI Crude prices have been resilient at US$67.50 per barrel. Looking ahead, we do not expect any erratic movement in the market as the main interest lies in the equity market.

We project the range from US$62.50 to US$67.50 per barrel as demand declines. Piercing above the US$67.50 resistance may reach US$70 per barrel though we do not foresee this event.

Crude Palm Oil (FCPO) Futures on Bursa Derivatives rallied and challenged 13-year high last week. Market traded in optimism from rising demand.

May Futures contract settled at RM4,126 per metric tonne on Friday. We foresee the trend will push higher though a small correction might draw down to RM4,200 per metric tonne. The topside target is at RM4,200 per metric tonne level.

Gold prices bounced off US$1,680 per ounce bottom with strong buying interest identified at US$1,680 to US$1,700 per ounce. We expect the market movement to be volatile and range from US$1,700 to US$1,740 per ounce in mixed trading. Traders are advised to exercise patience.

Silver prices have shown support rising at US$24.80 per ounce last week. We predict the trend could be sideways as it might dip again.

The overall range is expected to be contained from US$25 to US$26.50 per ounce in mixed trading activity. As usual, market traders will focus more on the yellow metal currently with little interest in the silver market.

 

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]