Fundamental outlook
US trade deficit shot to a new high at US$74.4 billion in March. The shortfall with China increased 22 per cent as Americans lean to more towards purchasing foreign goods after receiving the stimulus.
American payrolls increased 266,000 in April, falling short of the one million expectations. Unemployment rate rose 6.1 per cent last month. Dow market gained 229 points at closing as market traders speculate more stimulus and easing policies will be reinforced by the Federal Reserve.
Treasury Secretary Janet Yellen commented that interest rate might need to be raised in order to fight growing inflation. Last week, the US stock indexes went on a roller coaster ride on fear of a rate hike but the market recovered on Friday after weak payroll figures.
Bank of England held the monetary rate unchanged with main lending rate at 0.1 per cent and asset purchase programme at 895 billion pounds. BoE Governor Andrew Bailey expect growth pick up and reach beyond seven per cent until the end of year.
Technical forecast
US dollar/Japanese yen saw strong resistance at 109.50 and declined on Friday. We expect the market to decline further as the dollar weakens. Market movement is expected to be from 108 to 109 while selling pressure could increase. Caution is advised in case of unexpected price swings.
Euro/US dollar traded in a ‘V’ pattern last week and closed at 1.216. The trend is prone to climb higher with support rising at 1.207. Topside is temporarily identified at 1.226 while we propose to observe further. Market might whipsaw in a swinging trend if the bulls cannot cross above 1.226 resistance.
British pound/US dollar traded in a small range last week but prone to firm sentiments as we forecast an imminent decline.
We expect the resistance to be very tough at 1.40. A potential downfall might return to S1 – 1.38 and S2 – 1.37 as our target. However, in the unlikely event of piercing above 1.40, abandon your short-term view.
WTI Crude prices traded in a small range, hovering around US$65 per barrel last week. Traders are still observing the weakening dollar which could push crude prices higher. We presumed the market range could be contained from US$62.50 to US$67.50 per barrel. Beware of an unexpected price extension beyond this range.
Crude Palm Oil (FCPO) Futures on Bursa Derivatives rose above RM4,200 per metric tonne and climbed higher. Demand of palm oil increased on a regional basis while inter-market commodities generally increased.
July Futures contract settled at RM4,427 per metric tonne on Friday. We foresee the trend to grow stronger while sitting on RM4,360 per metric tonne. Topside target might be at RM4,600 per metric tonne as the next milestone.
Gold prices penetrated above US$1,800 per ounce last week. We foresee the market could be leaning towards growing demand and it could rise higher. An initial mixed trading is expected to occur from US$1,800 to US$1,850 per ounce. However, breaking above US$1,850 per ounce could potentially rise to US$1,880 per ounce as our next target.
Silver prices have broken above US$26.60 per ounce last week. We predict the trend could be well supported at US$270 per ounce and climb higher. Our next target is identified at US$28.50 per ounce or higher, depending on the gold’s uptrend.
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].