Fundamental outlook
US GDP grew 6.5 per cent in 2Q, still weaker than expectations. Market traders believe the Federal Reserve will continue a more resilient support to help the market recover.
US Federal Reserve held its benchmark interest rate at zero to 0.25 per cent while Fed chairman Jerome Powell commented that the economy is continuing its recovery despite ongoing concerns over the pandemic. The central bank is currently buying US$120 billion worth of bonds monthly to inject liquidity into the market.
The recent acute regulatory checks by the Chinese Government has sent Hong Kong, mainland Chinese and US listed Chinese stocks tumbling. Funds focused on Chinese stocks have seen inflows of US$3.6 billion, of which US$300 million went into Chinese tech funds.
The eurozone’s GDP gained two per cent for the quarter ended June, after contracting for the last two consecutive quarters. The European Central Bank said in a statement that policymakers would keep interest rates at the present or lower levels until inflation rate stays at two per cent.
The delta variant has spread all over the world. The World Health Organisation officials are studying why the delta variant is more transmissible and potentially makes people sicker than the original coronavirus strain.
Technical forecast
US dollar/Japanese yen descended from 111.50 to 109.50 area as the dollar weakened. We foresee traders could remain cautious and there could be little activity for this market.
The range trading is expected from 109 to 111 in mixed trading sentiment.
Euro/US dollar traded higher last week but within 1.175 to 1.19. We forecast the trend could continue to stay strong and range from 1.18 to 1.195. Some mixed trading activities are expected as traders might make some adjustments in position with the pound.
British pound/US dollar traded below 1.40 after rising from 1.375. We reckoned the market could be trading sideways from 1.38 to 1.40. Traders will be watching the dollar closely in case it affects the euro in August.
WTI Crude prices traded in a very small range last week but stayed above US$72 per barrel. We predict the trend could be firm but contained within US$72 to US$76 per barrel. Crude prices are still very much controlled by OPEC+ members and remains supported above US$70 per barrel. It is unpredictable if the demand could pierce above US$76 per barrel in August.
Crude Palm Oil (FCPO) Futures on Bursa Derivatives traded firm but slowed down last week. October Futures contract settled at RM4,371 per metric tonne on Friday. The market is expected to be resilient at RM4,500 per metric tonne and likely to begin correction after mid-week. Breaking beneath RM4,300 per metric tonne support will probably lead to RM4,100 per metric tonne as our next target.
Gold prices traded largely from US$1,790 to US$1,830 per ounce last week as we predicted. However, the market might ascend this week if the bulls pierce above the US$1,840 per ounce. The initial range is forecast to stay inside US$1,800 to US$1,830 per ounce while waiting for the dollar’s movement. A potential dip in the dollar index could lift gold prices.
Silver prices rebound from US$24.50 per ounce last week. The market is gaining firm demand and would likely stay firm above US$25 per ounce. We expect the prices will trade in a sideways range from US$25 to US$26 per barrel while traders could remain alert for a possible breakthrough on the upside.
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.