Fundamental outlook
US GDP grew four per cent in the fourth quarter of 2020 (4Q20), below forecast. Federal Reserve commits to its benchmark short-term borrowing rate at near zero while maintaining an asset purchasing programme of US$120 billion a month. Chairman Jerome Powell said the economy is slowing down and vowed to retain low rates before inflation achieves a two per cent target.
Weekly claims for the week ended January 23 was 847,000, a decline from the previous week.
Last week, US stock markets whipsawed in uncertainty due to initial worries about the raging Covid-19 pandemic. The rising effectiveness in new vaccines from brands like Novarax has added confidence in the market.
China surpassed US in terms of receiving foreign direct investments in 2020, with an inflow of US$163 billion foreign capital compared with US$134 billion invested in US.
Crude stock fell to nearly 10 million barrels. WTI prices traded in firm sentiment and stood above US$52 per barrel before the weekend.
Technical forecast
US dollar/Japanese yen climbed higher last week as the dollar has strengthened. The range moved from 103.50 to 105 and will likely stay firm in the coming week. We forecast the trend will attempt 105.50 before profit-taking might arise. Traders should stay alert and observe the support at 104.
Euro/US dollar traded in a narrow sideways range last week while strongly resisted at 1.22 last week. We reckoned the overall range is prone to fall once the bears break below 1.205 support. The dollar is leaning towards a recovery and will push the euro downward to test 1.195.
British pound/US dollar revolved around 1.37 for the whole of last week. The market has been uncertain and traders’s interest have waned. We predict the trend might fall to 1.35 but beware of an unexpected uptrend in case the bulls pierce above 1.37.
WTI Crude prices stood above US$52 per barrel last week but also capped beneath US$54 per barrel. The market movement has been contained within a tight range. We prefer to observe the breakout beyond this range in either direction and expect the trend to travel another US$2 per barrel.
Crude Palm Oil (FCPO) Futures on Bursa Derivatives reversed upward last week as traders established new long positions. Demand has gone up as output has been reduced due to the shortage of labour stemmed from the impact of Covid-19. April Futures contract settled at RM3,489 per metric tonne on Friday. We foresee there might be a quick pull down at RM3,400 per metric tonne before mid-week. Driving above RM3,500 per metric tonne will carry the potential to reach RM3,600 per metric tonne.
Gold prices traded in mixed sentiments last week while contained from US$1,835 to US$1,875 per ounce. This week, we foresee the trend will be initially unchanged until the movement breaks out of the aforementioned range. We expect a higher probability in heading southward and falling beneath US$1,835 per ounce which could drive lower to US$1,815 per ounce.
Silver prices rose on Thursday and Friday. We reckoned the range will stay within US$26 to US$28 per ounce this week and continue to trade sideways. Traders are likely to adjust their positions and create mixed sentiment in the market until a new trend breaks beyond this aforementioned range.
Dar Wong has 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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