Fundamental outlook
Federal Reserve policymakers pledged not to raise rates until the inflation reaches two per cent recovery and the economy attains full employment. The monthly purchase of US$120 billion in bonds will continue to help the economy grow.
US weekly jobless claims totaled 885,000 in the week ending December 12, making it the highest recorded since early September.
The eurozone PMI composite index, measuring both manufacturing and services, rose to 49.8 in December, up from 45.3 in November and doing fairly good despite the lockdown in many European countries.
French President Emmanuel Macron has been tested positive for Covid-19, prompting several other European officials to go into quarantine.
The Bank of England kept its monetary policy unchanged by maintaining main lending rate at 0.1 per cent and the asset purchases programme at 895 billion pounds.
UK and EU officials agreed to extend Brexit talks beyond December 31, prompting the recovery in the pound.
Technical forecast
US dollar/Japanese yen fell to 103 support and settled near to this bottom on Friday. We foresee the trend could either reverse to 104 for a recovery or pierce beneath 103 support. In case of a downtrend, the market will attempt 102 target. Focus on the dollar’s direction to observe the US dollar-yen trend.
Euro/US dollar pierced above 1.22 resistance last week and turned this level into a strong support now. We predict the trend will continue to be bullish and potentially aim for 1.25 as the next target. Risk control should be reinforced at 1.22 level in case of a drawdown.
British pound/US dollar reversed up after the Brexit deal was extended by EU officials. The market is limited to 1.36. The range would likely be contained from 1.335 to 1.36 region in mixed sentiment. Traders need to exercise caution in case of a price violation beyond the aforementioned range.
WTI Crude prices climbed higher from US$46 per barrel to US$49 per barrel last week. Oil prices rose from a weaker dollar trend but still encountered strong resistance. We project the range could be contained from US$48 to US$51 per barrel if the dollar continued to stay on the low side. However, we also expect less market activity during the Christmas season.
Crude Palm Oil (FCPO) Futures on Bursa Derivatives traded sideways last week. Basically, the market range was well contained within our predicted region. March Futures settled at RM3,443 per metric tonne on Friday. We retain our projection for the trend to trade from RM3,350 to RM3,450 per metric tonne. If the market breaks beyond the aforementioned resistance, it could reach RM3,500 per metric tonne.
Gold prices traded higher as the dollar weakened last week. We reckoned the resistance will emerge at US$1,900 per ounce. Overall range will be contained from US$1,840 to US$1,900 per ounce while traders will focus on the dollar’s strength and stimulus from the Federal Reserve to lead the gold trend. Caution is reminded in case of unexpected trends emerging in the market.
Silver prices broke above US$24.80 per ounce level but limited to US$26 per ounce resistance now. While silver is still following the gold’s trend, we expect the market to be smaller in price movement in December. The overall range is projected to be from US$24.50 to US$26 per ounce but beware of piercing above US$26 per ounce.
Dar Wong has 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.
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