Fundamental outlook
SEVERAL policymakers in US debated on raising rates starting in 2022 or 2023. The Dow fell almost 1,200 points throughout the whole week following the news of rates tightening by Federal Reserve. Dow markets dipped 533 points on Friday at closing.
Gold prices slid over US$100 and reached US$1,763 per ounce. Surprisingly, WTI Crude is holding well above US$70 per barrel but capped below US72 per barrel.
Mid last week, US Federal Open Market Committee (FOMC) announced policymakers’ effort to leave its benchmark short-term borrowing rate anchored at near zero. Policymakers raised its expectations for an inflation this year to 3.4 per cent and this could bring forward the time frame for raising interest rates.
The US producer prices rose 0.8 per cent in May on a monthly basis, beating forecast. Retail sales slid 1.3 per cent which was worse than expectations.
Technical forecast
US dollar/Japanese yen traded firmer but still limited below 111. The market might stay within the 109.50 to 111 while waiting for the dollar to reveal a more significant catalyst. Going either direction is possible for the market and we remind the traders to be cautious.
Euro/US dollar dipped as we expected last week. The market went below 1.20 as the dollar rose. We expect some support to emerge at 1.18 while the range could be capped below 1.20. Buying demand could emerge at 1.175 to 1.18.
British pound/US dollar saw a bearish trend after the price movement dropped below 1.41 last week. We forecast the down trend will continue as we see bargain-hunting activity could emerge at 1.355 to 1.36. The resistance could shift down to 1.39 in case of a recovery.
WTI Crude prices have been holding firm above US$70 per barrel last week. As the dollar tends to stay resilient, we foresee the WTI might correct lower. The overall range could be contained from US$68 to US$72.50 per barrel unless some unexpected catalyst occurs.
Crude Palm Oil (FCPO) Futures on Bursa Derivatives dipped as we expected last week. The market traded lower due to falling regional demand. September Futures contract settled at RM3,424 per metric tonne on Friday. We target an initial range from RM3,300 to RM3,500 per metric tonne in mixed consolidation. Breaking above RM3,500 per metric tonne could lead to RM3,600 per metric tonne.
Gold prices fell off US$1,900 per ounce on Friday after the dollar recovered. We forecast the trend could be making another correction while contained from US$1,860 to US$1,900 per ounce. Traders are mostly collecting new long positions every time the trend retraces downward.
Generally, investors are still optimistic on the upside potential of the market in the second half.
Silver prices went below US$27 per ounce last week. We believe the market could meet some bargain-hunting activity at US$25 per ounce in case the bears persist.
The overall range is expected to be contained from US$25 to US$27 per ounce in mixed trading. However, we foresee more traders could focus on the yellow metal’s performance than silver in during this correction 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].