Fundamental outlook
US producer prices gained 0.3 per cent in November, surpassing expectations. Excluding fresh food and energies, core prices rose 0.4 per cent versus the revised 0.1 per cent gain in October. Traders expect a rate hike for this week’s FOMC meeting with an expected range of 0.5 to 0.75 per cent.
The US government will send US$275 million on military aids to Ukraine. NATO chiefs are wary on this decision as this could cause further conflict with Russia. The US and UK governments continue to impose more sanctions on Russia.
China consumer prices rose 1.6 per cent in November, against 2.1 per cent gains annualised rate in October. Producer prices fell 1.3 per cent.
China’s President Xi Jinping visited Saudi Arabia on Friday and called for the yuan to settle in oil trades. As the biggest buyer of energy products from Saudi, Chinese leader encouraged the hedging of oil trades move in the Shanghai Petroleum and National Gas Exchange.
On Friday, UK announced extensive reforms to its financial regulation to jump-start a new economic recovery. The initiative includes 30 measures that also involves a relaxation of the rule that requires banks to separate their retail operations from their investment arms.
Technical forecast
US dollar/Japanese yen capped beneath 137.50 resistance while waiting for the FOMC outcome. We forecast the trend will likely range from 132.50 to 137.50 but breaking beyond in either direction will extend into a new headway. Traders are advised to stay cautious. Euro/US dollar traded in a narrow range below 1.06. We predict the market trend will likely be erratic and move from 1.02 to 1.06. Traders are reminded to be prudent in case the trend breaks beyond this aforementioned range. General market sentiment is waiting for outcome of the FOMC.
British pound/US dollar has been hovering at 1.23 before the weekend. We expect the initial range to be contained from 1.19 to 1.23. Beware of the dollar movement after the FOMC outcome on Wednesday that will probably push the pound downward.
WTI Crude prices fell last week after Russian President Vladimir Putin ridiculed the “price-cap” system by the G7 countries. The market fell below US$77 per barrel and settled at US$71.75 per ounce on Friday. We reckoned the market trend might continue to fall to US$64 per barrel. The overall range is expected to range from US$64 to US$77 per barrel.
Crude Palm Oil (FCPO) Futures on Bursa Derivatives traded sideways last week amid uncertainties. Traders are waiting for crude prices to show a clearer direction before initiating new positions. February 2023 Futures contract closed at RM3,987 per metric tonne on Friday. We forecast the range will likely move from RM3,850 to RM4,050 per metric tonne. Breaking in either direction will initiate a new headway in the FCPO market.
Gold prices have been restricted beneath US$1,810 per ounce. We foresee the gold market might turn downwards if the prices fail to climb above US$1,820 per ounce. We target the initial range will stay within US$1,770 to US$1,820 per ounce but breaking beneath this range will attempt our second support at US$1,730 per ounce.
Silver prices encountered resistance above US$23 per ounce before the weekend. We foresee the trend might drop and range from US$21 to US$24 per ounce. Profit-taking activity is expected to occur if the dollar makes a recovery after mid-week.
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].