Fundamental outlook
THE European Central Bank (ECB) expressed concerns on the growing corporate debt burden amongst larger service sectors in the eurozone as this could increase pressure on governments and lenders in these nations. The current stimulus is issuing a package of 1.85 trillion euros for purchasing bonds and should see through to March 2022.
US jobless claims for the week ending May 22 fell to 444,000, the lowest since March 2020. Stock markets whipsawed and fluctuated last week on worries about a new corporate tax and tapering activities by policymakers.
China’s industrial production rose 9.8 per cent in April on an annual comparison but lower than 14.1 per cent gains recorded in the previous month. China’s economic growth recovery is still fluctuating in the wake of the Covid-19 pandemic.
Bitcoin and other cryptocurrencies fell last week after China announced a crack down on the mining and trading behaviors onshore its mainland. On Friday, Dow benchmark gained 123 points and closed at 34,207 after fund sought after equity markets.
Technical forecast
US dollar/Japanese yen traded in a slightly weak trend last week with support emerging at 108.50. This week, we foresee the trend could remain stagnant and range from 108.50 to 109.50. Low volatility is expected but traders need to be cautious in case the market movement breaks beyond the aforementioned range.
Euro/US dollar has exhibited strong resistance at 1.223 last week. The market is prone to trade lower this week if the resistance can remain intact. We expect a small range from 1.21 to 1.223 unless the dollar moves in beyond this range which could affect the euro’s trend.
British pound/US dollar topped off 1.42 on Friday. We foresee strong resistance at 1.42 but it is prone to decline. We forecast the bears might drop to 1.40 as our first target. Risk control is advised in case of an unexpected movement in the market.
WTI Crude prices stood at US$62 per barrel after the market descended from US$66 per barrel last week. The trend could be contained from USD$62 to US$66 per barrel with strong support below US$62 per barrel. A market breakthrough is unlikely.
Crude Palm Oil (FCPO) Futures on Bursa Derivatives engaged in a correction after the rolling over to August. Regional demand for edible oil has slowed down temporarily due to price jitters in the commodity market.
August Futures contract settled at RM3,991 per metric tonne on Friday. The market will likely continue its correction with some liquidation in the market. The overall range is expected from RM3,800 to RM4,400 per metric tonne.
Gold prices attempted to reach above US$1,880 per ounce on Friday and closed lower. We reckoned the range could be contained from US$1,850 to US$1,900 per ounce in consolidation.
Traders might see a swing movement in the market while traders adjust their positions in mixed trading. Piercing above US$1,900 per ounce level is not likely to happen in May but this eventual uptrend could reach US$1,960 per ounce sometime later.
Silver prices have shown some resistance at US$28.30 per ounce last week. The market trend might move into a sideways swing from US$27 to US$28.50 per ounce. Only piercing above the aforementioned resistance could reach higher to US$30 per ounce in the near future. Traders should stay cautious and patient during this consolidating period.
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].