Monday, May 10

US GDP grows 6.4 per cent in 1Q

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Fundamental outlook

 

US GDP jumps 6.4 per cent in 1Q. Jobless claims fell to 553,000 for the week ended April 24 but still worse than forecast.

President Joe Biden rounded up his first 100 days in White House office by maintaining the tech-battle with China while looking to form strategic alliances with allied countries to surpass China.

Federal Reserve chairman Jerome Powell maintained the short term interest rate near to zero while purchasing US$120 billion of bonds monthly. He also foresees a faster growth and higher inflation towards the end of the year.

European GDP fell 0.6 per cent in 1Q as major cities locked down in Germany, Italy and Spain. There is a rise of Covid-19 cases worldwide as strains mutate, making it more infectious. Covid-19 cases in India have risen to more than 400,000 cases in a single day.

 

Technical forecast

 

US dollar/Japanese yen reversed upwards last week to above 108. We foresee the trend will be firm and supported at 108.50. Upside may reach 110 as the dollar tends to strengthen in small recovery. Sellers should remain cautious and refrain from entering the market too early.

Euro/US dollar turned down last week and could be resilient at 1.21. We expect the trend to be bearish and might drive down to 1.1950 in the coming days.

The correction in the euro is relative to the recovering dollar and could cause the trend to move sideways for a while. Traders need to be patient while waiting for a breakout before finding a new entry.

British pound/US dollar showed a bearish sign on Friday. The resistance could emerge at 1.39 in case of a quick pull-up. We still retain our view that the downtrend will probably reach 1.37 at the end of the coming week. In our opinion, the pound could start to move into a long-term bear trend from this month onwards.

WTI Crude prices saw a slight bearish pattern on Friday by closing below US$64 per barrel. The market sentiment will be prone to weaker trend this week as the dollar recovers. We predict the range will be lower while contained from US$61 to US$64 per barrel. Sellers need to control their risk in case of an unexpected surge above US$65 per barrel.

Crude Palm Oil (FCPO) Futures on Bursa Derivatives traded in a short week and stayed below RM4,100 per metric tonne. July Futures contract settled at RM3,953 per metric tonne on Friday. We presume the market will be resisted at RM4,000 per metric tonne and prone to fall into a correction. The downside support could emerge at RM3,850 per metric tonne in case of a price dip.

Gold prices traded slightly lower last week as the dollar index (USDX) gained to above 91. We reckoned gold could dip slightly lower again at US$1,750 per ounce before some bargain-hunting activities emerge. The overall range is expected to be contained from US$1,750 to US$1,780 per ounce in mixed trading sentiment.

Silver prices have shown strong resistance at US$26.50 per ounce last week. Moving forward, the market tends to correct in early May with target aim at US$25 per ounce.

However, piercing above US$26.50 per ounce will need to abandon your short-view and prepare for a new rise in demand for silver.

 

Dar Wong has more than 30 years of trading and hedging experiences in global financial markets. The opinion is solely his own. He can be reached at [email protected]