Fundamental outlook
US President Joe Biden announced that the White House has struck an infrastructure deal of US$600 billion as part of the US$1.2 trillion transformation package. The S&P 500 Index closed at a historical high 4,266 on Thursday.
US manufacturing PMI was at 62.6 in May, the highest recorded since 2008. Fed chairman Jerome Powell said US will not likely see an inflation resembling the 1970s’. Initial jobless claims rose to 411,000 for the week ended June 19, worse than the 380,000 estimates and crossing above 400,000 for the second week.
UK consumer price inflation gained 2.1 per cent in May, higher than the two per cent target for the first time in almost two years. Core inflation, excluding fresh food and energy prices, rose to two per cent in May compared with 1.3 per cent in the previous month.
The Bank of England kept the lending rate unchanged at a historical low of 0.1 per cent while maintaining the asset purchase programme at 895 billion pounds. Policymakers voiced concerns on rising inflation but see no need for a tightening in monetary policy until mid-2022.
Technical forecast
US dollar/Japanese yen climbed last week but stayed resisted below 111. The market might rise if the trend settles above 111 for more than four days. We foresee the trend might fizzle out and begin a new correction with a downside target set at 110.
Euro/US dollar bounced off 1.185 and moved into a tight range. We forecast the range could be contained from 1.185 to 1.20 until a new trend breaks beyond.
The dollar could be a market leading factor in deciding the euro’s trend.
British pound/US dollar saw good support at 1.38 last week. The market trend could consolidate for a while between 1.38 to 1.405 before finding a new headway. Remarks by policymakers on holding the rate tightening until mid 2022 will render the pound to be slightly weak for the time being.
WTI Crude prices inched up slowly but contained within US$72 to US$75 per barrel. For the past weeks, the price trend has been crawling up slowly due to a decline in production. This week, we predict the firmness could remain in the market with unchanged sentiment. However, traders should be prepared for risk control in case of an unexpected fall beneath US$70 per barrel.
Crude Palm Oil (FCPO) Futures on Bursa Derivatives opened below RM3,300 per metric tonne and closed above RM3,500 per metric tonne on Friday. September Futures contract settled at RM3,516 per metric tonne on Friday. We predict the initial range could be contained from RM3,400 to RM3,600 per metric tonne. However, there is a high possibility of piercing above RM3,600 per metric tonne after mid-week and reach RM3,700 per metric tonne as our next target.
Gold prices reversed from US$1,760 per ounce support but has stayed below US$1,700 per ounce for the time being. We expect the range to be contained from US$1,760 to US$1,800 per ounce without high expectation of breaking through this range. However, traders should be prepared for risk control.
Silver prices traded in a narrow range last week while largely contained from US$25.50 to US$26.00 per ounce. We expect little change in market sentiments. The overall range might be contained from US$25.50 to US$26.50 per ounce as trading interest wanes. Gold prices could remain as a prime focus in the market than the silver market.
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 dar@alaa.sg