Fundamental outlook
US’ S&P 500 index closed at a new high as the market settled at 3,974 on Friday from recovering, bullish sentiments after the 10-year bond yields declined to 1.674 per cent.
Intel disclosed its intention to invest US$20 billion on two new chip plants in Arizona. Chip-makers and high-tech stocks took an upturn last week after a recent correction.
President Joe Biden announced his target to administer 200 million vaccination shots within 100 days of his inauguration. So far, 100 million shots have been administered to Americans.
North Korea fired at least one missile during the weekend of March 20, making it the first missile test by North Koreans during Biden’s Administration. The missile test worried the Peninsula nations and US officials commented that the action is to get Biden’s attention.
The Suez Canal has been blocked by a vessel since last Tuesday after it was deviated by strong wind and wedged the ship along the Suez Canal, causing a blockage. All other cargo ships cannot pass through the water passage, causing a daily average of US$9 billion worth of goods being stalled. Market observers presumed crude prices might rise in the near term due to the hampering supply caused by the blockage along the Suez Canal.
Technical forecast
US dollar/Japanese yen traded higher before weekend as the dollar strengthened. However, the trend is approaching the 110 resistance as traders prefer to observe upcoming direction. We foresee the market could be contained from 109 to 110. In case of protruding above the 110 resistance, the bulls might reach 111.50 as our next target.
Euro/US dollar declined last week due to the rising greenback. We expect the resistance to emerge at 1.19 area while a decline is possible. Going below 1.1750 level might lead to a decline to 1.16. Long traders should be aware of risks.
British pound/US dollar traded sideways last week as traders remained prudent. We reckoned the resistance could emerge at 1.3850 in case of a pull-up in retracement. The range is expected to be contained from 1.3650 to 1.3850 but breaking beneath this support will probably drive down to 1.345.
WTI Crude prices have been trading around US$60 per barrel last week due to the fear of a global supply shortage from the Suze Canal blockage. We aim for initial range from US$58 to US$62 per barrel for the market without much expectations. However, breaking above US$62 per barrel due to unforeseen circumstances might lead to US$65 per barrel target. A potential strengthening in the dollar value could put a lid on oil prices.
Crude Palm Oil (FCPO) Futures on Bursa Derivatives fell on Friday as traders unwound positions. An analyst expected a decline of 500,000 tonnes in production this year and expect prices to be firm. June Futures contract settled at RM3,695 per metric tonne on Friday. We expect strong support at RM3,670 per metric tonne and likely to recover to RM3,820 MT in case of rising demand. Long traders should safeguard their risk in case of unexpected fall.
Gold prices traded in small range from US$1,720 to US$1,740 per ounce last week. The market trend is very prone to surge this week as the momentum has gathered over past days. Going above US$1,740 per ounce might drive up to US$1,800 per ounce. Support will remain consistent at US$1,720 per ounce in case of a drawdown.
Silver prices have been gathering strength and would likely recover this week. The market is prone to be firm this week and trade from US$24.50 to US$26.50 per barrel. Risk control should be observed if the trend breaks beyond either direction and move against your interest.
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.
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