Fundamental outlook
US Federal Reserve chair Jerome Powell said the US economy and labour market have healed to the point that the central bank could begin to withdraw its stimulus measures by the end of the year but rate hikes will not be imminent.
This indicates the cutting of monthly bond purchase worth US$120 billion will kick-in once the economy recovers but low interest rates will stay effective until employment regains traction.
The US prelim GDP grew 6.6 per cent in 2Q, below consensus’ expectations. Weekly jobless claims rose to 353,000 for the week ended August 21 versus the revised 349,000 in the previous week.
German manufacturing index gained 62.7 in August, the highest recorded in six months. Europe’s overall manufacturing index rose to 61.5, still below forecast.
On Friday, an airport in Kabul was attacked by a suicide bomber, with at least 13 US service members and 90 Afghans killed by the attack. The US and its allies warned that more terrorist attacks in Kabul are likely, as the dateline for US’ military withdrawal looms closer from Afghanistan.
Technical forecast
US dollar/Japanese yen traded above 110 and closed below this level on Friday. We presumed the trend could turn bearish with resistance emerging at 110.30. The downside potential could be at 108.50 in case the dollar falls. Abandon your short-term view if the trend rises above 110.30.
Euro/US dollar saw buying forces beneath 1.17. The market could be supported at 1.175 and likely to rise. We expect the bulls to reach 1.19 due to the weakening dollar. Risk control is advised in case the trend falls beneath 1.175 support.
British pound/US dollar recovered on Friday and closed at 1.375. We foresee the bulls rising higher to 1.385. The support will likely sit on 1.37 in case of a drawdown. A secondary support will likely be at 1.36.
WTI Crude prices returned to US$68 per barrel last week after short-covering in the market. We predict the market range could be contained from US$66 to US$70 per barrel while watching the dollar’s direction.
Mixed trading sentiment is expected in market as traders hope to observe more market fundamental news.
Crude Palm Oil (FCPO) Futures on Bursa Derivatives traded in short-covering last week. The industry continues to face production shortage from lockdown restrictions. November Futures contract settled at RM4,329 per metric tonne on Friday. We forecast the resistance could emerge at RM4,400 per metric tonne and likely to decline. The market range might extend downwards to RM4,100 per metric tonne before buying activity arises.
Gold prices broke up above US$1,800 per ounce after Powell’s comment that rate hike is not imminent. We reckoned the trend could be contained from US$1,800 to US$1,840 per ounce and is expected to be in mixed trading sentiments.
Strong bargain-hunting activities are likely at beneath US$1,800 per ounce in case of a quick correction.
Silver prices bounced off US$23 per ounce level and is now sitting on stronger support at US$23.50 per ounce.
The market is prone to make a recovery at US$25 per ounce or slightly higher. We believe the recovery in silver prices will begin if gold prices can maintain strong interest above US$1,800 per ounce.
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].