Fed committed to fighting inflation

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Fundamental outlook

 

US Federal Reserve chairman Jerome Powell says he will strongly commit to raise rate to fight the inflation until “the job is done”. Market analysts forecast that there will likely be another rate hike before end-September in the FOMC meeting.

On Friday, the US stock markets closed higher, snapping the recent losing streak. Dow benchmark gained 377 points at closing and in the wake of a big inflation report expected by the end of September.

The European Central Bank announced a rate hike of 75 basis points, taking its benchmark deposit rate to 0.75 per cent. On the other hand, Bank of England postponed the central bank meeting for 10 days to the mourn the passing of Queen Elizabeth II.

Analysts comment the Britain might move into a new uncertain era under the new leadership of King Charles III.

 

Technical forecast

 

US dollar/Japanese yen topped 145 last week, a 24-year record high before heading to a correction at 142.50. We predict the market will stay firm within the range of 142 to 144. Breaking beneath 142 support will likely lead to 140 as our next support area.

Euro/US dollar closed above par on weekly gains after the dollar softened. The resistance might emerge strong at 1.10 and push the trend into a correction. We have identified the support to at 0.9950 in case of a drawdown. We reckoned the market movement will likely stay within this range until the upcoming FOMC meeting.

British pound/US dollar has been trading in a small range around 1.15 last week until the trend settled higher at 1.1580 on Friday. We forecast the trend will likely trade from 1.15 to 1.17 amid quiet trading as Britain go into national mourning. We do not expect much liquidity in the market. However, risk control is still reminded.

WTI Crude prices reversed upward from US$82 per barrel and settled at US$86.50 per barrel on Friday. The market will likely stay firm if the US$82.00 per barrel can remain unbroken. The overall range is expected to move from US$82 per barrel to US$90 per barrel in the wake of a technical recovery. Oil traders will gradually return to the market to fish the bottom if the US$80 per barrel remains.

Crude Palm Oil (FCPO) Futures on Bursa Derivatives traded lower last week and found its support at RM3,549 per metric tonne.

The market rebound slightly and November 2022 Futures contract settled at RM3,595 per metric tonne on Friday. We target the support will likely emerge at RM3,450 to RM3,500 per metric tonne while the trend is prone to recover. We foresee the bulls will return after the rollover period with the topside target is expected at RM3,800 per metric tonne.

Gold prices have been sitting well on US$1,700 per ounce support. We target the trend will recover while trading from US$1,700 to US$1,740 per ounce. However, pay attention to the dollar index as an inverse indicator to gold market’s direction in case the greenback charges above 110 again.

Silver prices turned up from US$18 per ounce support and closed at US$18.80 per ounce on Friday. We expect the trend to move from US$18.50 to US$19.50 per ounce in firm sentiment. However, beware of piercing beneath US$18.50 per ounce that might lead to US$18 per ounce again for re-testing the support.

 

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].