Fundamental outlook
FED chairman Jerome Powell said US’ inflation is expected to be higher in 2022. The US Federal Reserve cited the tapering programme will begin by late November. There will be a monthly reduction of US$10 billion in bonds purchases and US$5 billion in asset-backed securities.
US payrolls rose 531,000 in October, better than consensus’ expectations. Unemployment was down to 4.6 per cent compared with 4.8 per cent in September. The dollar index re-visited 94.50 high and settled slightly below this level.
On Friday, all three major US indexes closed at a record high again after market traders celebrated the recovery in job growth on Friday. The Dow benchmark settled at 36,327, S&P 500 Index closed at 4,697, while Nasdaq Composite edged up to 15,971.
Food prices in China has been growing every week in October, according to Ministry of Commerce. The tightening policies in other major economies on containing rapid inflation might limit the scope of the Chinese government in easing its policies. The OPEC+ group has agreed to increase 400,000 barrels per day each month and this is expected to continue until end of 2022. WTI Crude prices retreated on 80 and bounced slightly after profit-taking activities emerged before the weekend.
The largest trade deal in the world, the RCEP, will kick start in January 2022. This trade pact involves Asean member countries, Japan, South Korea, Australia, New Zealand and China, totaling to 15 countries.
Technical forecast
US dollar/Japanese yen failed to conquer above 114 level last week. The market trend might head downwards for a correction this week. The range is expected to be contained from 112 to 114 as the dollar index hit the top of 94.50. Traders are advised to be prudent in risk control.
Euro/US dollar is currently sitting in a very neutral zone at 1.155. We reckon the 1.15 support is very crucial to make a rebound. The overall movement is expected to be contained from 1.15 to 1.17. Beware of an unexpected dive beneath 1.15 that must be reinforced with risk control.
British pound/US dollar bounced off 1.345 on Friday. We forecast the support will emerge at 1.34 to 1.345. Topside range is still limited at 1.365 with strong selling pressure in case of a recovery. Traders should exercise caution if the market breaks beyond the aforementioned range in any direction.
WTI Crude prices re-tested US$80 per barrel last week after the OPEC+ announcement. We foresee the support will stay strong at US$80 per barrel with some mixed trading activities expected. Topside target is expected to be at US$85 per barrel.
Crude Palm Oil (FCPO) Futures on Bursa Derivatives traded sideways around RM5,000 per metric tonne last week. January Futures contract settled at RM4,880 per metric tonne on Friday. We forecast the trend could continue to be contained from RM4,800 to RM5,100 per metric tonne in mixed trading. Beware of breaking beneath the RM4,800 per metric tonne support which might lead lower to RM4,550 per metric tonne.
Gold prices crossed above US$1,800 per ounce again on Friday after the payroll surged above expectations. The expectation of a higher inflation affected market sentiment and triggered a flight into the gold market. We expect the range will be moderately firm but remain below US$1,840 per ounce at the topside. Downside support could emerge at US$1,790 per ounce in case of a drawdown.
Silver prices recovered before the weekend with a strong base cemented at US$23.50 per ounce. This week, we target the trend to be bullish but limited to US$25 per ounce for the time being. Traders will begin to bargain-hunt in case of quick retracement in early part of the week. Precious metals are forecast to be prone an upward movement.
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].