Fundamental outlook
LAST Thursday, at the US FOMC meeting, policymakers confirmed the interest rate will be anchored at near to zero. The rate tightening will be pushed back while the tapering programme might begin before year-end.
In the wake of the Evergrande crisis on interest repayment default, fear erupted in the market early last week and caused a plunge in the US and euro markets. The overall sentiment recovered cautiously after mid-week as investors still worry on possible repercussions in global financial markets.
US House passed a bill that will temporarily fund the government and suspend the debt limit. The government will shut down on October 1 and it would not be able to pay for civil services if Congress does not pass legislation addressing both funding of the government and debt limit issues.
Before the weekend, the People’s Bank of China published a document on Friday that all cryptocurrency-related transactions in China are illegal, including services provided by offshore exchanges. Crypto-mining will become an illegal activity and the new regulation forces all crypto-related activities to flee China and Hong Kong.
Bank of England policymakers left its main interest rate unchanged at a record low of 0.1 per cent while the asset purchase target stayed at 875 billion pounds. Policymakers also warned that consumer prices could rise to above four per cent in 2021 due to deepening energy price shock.
Technical forecast
US dollar/Japanese yen traded bullishly after mid-last week as the yen weakened. The trend bounced off 109.20 floor and could reach 111.50 top this week before profit-taking emerges. We expect the range to be sideways from 110.50 to 111.50 after the bulls hit the forecast topside target.
Euro/US dollar turned up from 1.1688 last week and stay at 1.165. We foresee the price movement could trade sideways from 1.165 to 1.175 region in mixed trading. The market trend is still uncertain while waiting for the dollar’s trend.
British pound/US dollar has exhibited a very strong support at 1.36 to 1.3620 area on the day-chart. We forecast the trend will probably climb higher but restricted to 1.38. Beware of breaching beneath 1.36 support as this could lead to selling forces triggered by market fear.
WTI Crude prices traded mostly in our predicted range last week and capped below US$76 per barrel. We forecast the support will rise to US$71 per barrel and probably ascend slightly higher to US$76 per barrel. On the contrary, abandon your long-term view if it falls beneath US$70 per barrel.
Crude Palm Oil (FCPO) Futures on Bursa Derivatives climbed in recovery last week after the rollover. December Futures contract settled at RM4,442 per metric tonne on Friday. We expect the trend to be temporary resisted at RM4,500 per metric tonne and possibly drawdown to RM4,250 per metric tonne for a quick correction. Piercing above RM4,500 per metric tonne could force the market into another short-squeeze that could lead to RM4,600 per metric tonne.
Gold prices held back market demand last week but the market has kept to strong support at US$1,740 per ounce. We expect the trend might turn up very soon but test US$1,725 per ounce. The topside resistance still lies at US$1,775 per ounce in case of a price recovery. Beware of price swings before the coming mid-week.
Silver prices have been well defended at US$22 per ounce support on the day-chart. We aim for a sideways consolidation in a small range from US$22 to US$23 per ounce. There is no clear indication of market’s direction yet until we see the prices move out of this consolidated range.
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].