Fundamental outlook
US GDP grew weaker than expected 6.4 per cent in 1Q. Weekly jobless claims fell 406,000 for the week ended May 22, an improvement from previous data.
US Republican party unveiled a US$928 billion stimulus plan to counter President Joe Biden’s offer of US$1.7 trillion in infrastructure package. Treasury Secretary Janet Yellen said the current government budget runs like 2010 and calls for more spending.
US officials commented that China is still lacking behind the target purchase agreement signed in the phase-one deal back in January 2020. The agreement stated that China is supposed to purchase US$200 billion worth of agricultural products from US farmers over two years.
Gold prices closed above US$1,900 per ounce on Friday, signalling a strong bullish sentiment in June. Traders are watching the dollar’s trend as a potential factor which could push the yellow metal market higher into new highs. Historical high was created in August 2020 at US$2,073 per ounce.
Technical forecast
US dollar/Japanese yen hovered around 110 on Friday. We predict the market might stay resilient for a short while in case the dollar index bounces off 90 benchmark again. The trend is likely to be contained from 109 to 110.50 but beware of an unexpected fall towards the end of the week.
Euro/US dollar has been trading in a narrow range around 1.22 last week. The market has shown resilience at 1.225 but it might slip this week. We foresee the overall range will probably be from 1.21 to 1.2250. Traders are reminded to be vigilant in case of a price violation beyond the aforementioned range.
British pound/US dollar saw strong resistance at 1.42 last week. Strong selling pressure could emerge above this level to prevent a break through. We forecast the range will trade in lower from 1.405 to 1.42. Traders are reminded to abandon your short-term view if the trend settles above 1.42.
WTI crude prices traded firm last week but within our expectations. We expect the market to stay largely unchanged from US$62 to US$68 per barrel. Only breaking above the aforementioned range could trigger an alarm to international traders. Otherwise, we foresee the market movement should be tame.
Crude palm oil (FCPO) futures on Bursa Derivatives recorded a decline in prices due to profit-taking activity. Traders are mostly waiting for a retracement to bargain-hunt in the coming weeks. August Futures contract settled at RM3,916 per metric tonne on Friday. We foresee the market might slide to RM3,650 per metric tonne as demand declines. Short-recovery could reach RM4,050 per metric tonne.
Gold prices have been trading in firm demand and is set to climb higher once the dollar falls. We foresee the market might trade sideways from US$1,880 to US$1,920 per ounce and gradually ascend higher. Piercing above US$1,920 per ounce is a sign of new bullish sentiment in the market and it could reach US$1,960 per ounce.
Silver prices traded in a narrow range and hovered around US$28 per ounce last week. Moving forward, we presumed the movement will be similar this week from US$27.50 to US$28.50 per ounce. However, the silver market could be bullish in June with many buyers collecting their long positions at the bottom now. Strong support is expected below US$27.50 per ounce.
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.