Fundamental outlook
FEDERAL Reserve chairman Jerome Powell reassured that there will not be another interest hike until 2023, and he foresees stronger growth and rising inflation. Policymakers are committed to maintain near-zero rates to facilitate economic recovery and maintain monthly asset purchase programme at US$120 billion to ensure liquidity in the market.
US core retail sales, excluding automobiles, fell 2.7 per cent, the worst since May 2020.
On Friday, Dow Jones index fell on Friday after the Federal Reserve announced that it would not extend a pandemic-era capital break for banks which is expected to expire in March. Policymakers refuse to extend the supplementary ratio in using leveraged cash to hold Treasury Bonds, thus causing a fear in the market, triggering the sell of bonds and spike in yields. China reported that industrial production was at 35.1 per cent gains in February on an annual basis. Retail sales grew 33.8 per cent in February from a year ago. Both economic data are above expectations. The high-level meeting in Anchorage, Alaska between US and China leaders on Thursday saw a heated exchange. Both parties chided and reprimanded each other in an unusual display of public tension.
Technical forecast
US dollar/Japanese yen traded in a small range and revolved around 109 last week. The market’s activity has slowed down due to the uncertain movement of the dollar. We reckoned the market movement could be trapped from 108.50 to 109.50 until it breaks out in either direction.
Euro/US dollar exhibited strong resistance at 1.20 on the day-chart. We forecast the trend is prone to correct but could be contained from 1.18 to 1.20. Beware of piercing beyond this range in either direction. The dollar has been uncertain but will act as a leading factor in guiding the euro’s trend.
British pound/US dollar saw a downturn pattern on the day-chart and is prone to fall this week. The resistance has emerged at 1.40 and selling pressure could begin at 1.392. We predict the bears could take down the market and test 1.38. However, exercise caution if the market breaks beneath 1.38 and risk control is recommended for long traders.
WTI Crude prices encountered profit-taking activity last week with the bulls resuming its climb for the past five months. The trend could trade sideways from US$59 to US$63 per barrel in mixed sentiment. Despite the firm dollar, crude prices stayed resilient backed by OPEC’s support. Beware of some profit-taking in March.
Crude Palm Oil (FCPO) Futures on Bursa Derivatives fell last week due to profit-taking activities. The market peaked at RM4,247.50 per metric tonne on Monday before a sell-down occurred. June Futures contract settled at RM3,724 per metric tonne on Friday. We reckoned the trend could continue to reach lower at RM3,600 per metric tonne before rebounding. Bargain-hunting is expected to emerge from bottom prices while topside resistance could be at RM3,820 per metric tonne.
Gold prices traded in gradual strength from US$1,720 to US$1,750 per ounce last week. The trend is prone to climb in the coming weeks as traders begin to seek a safe haven in gold. We foresee the trend could stay firm within US$1,720 to US$1,770 per ounce. Some sideways trading might occur towards the weekend due to mixed sentiments.
Silver prices traded in a narrow range last week while capped beneath US$26.40 per ounce. We project the market trend to be prone to weakness but supported above US$25 per ounce. Some sideways trend might occur within this range as traders are still uncertain of the trend. Caution is advised in taking up a position in 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 [email protected].
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