Fundamental outlook
US payrolls rose 943,000 in July, the fastest in nearly a year despite the rise in Covid-19 Delta variant cases. Unemployment rate fell to 5.4 per cent, lower than in June. Dow benchmark and S&P index rose to new fresh highs after strong job reports.
US ISM manufacturing index gained 59.5 in July, declining for the first time after rising above 60 benchmark for the last five consecutive months.
The Bank of England kept its main lending rate at a historic low of 0.1 per cent, unchanged since March 2020, while maintaining the quantitative easing programme at 895 billion pounds. Policymakers adjusted their forecast of inflation to four per cent for the final quarter of 2021.
The Delta variant has been running rampant in the US. White House chief medical advisor Dr Anthony Fauci remarked that things could get worse as the new variant is spreading faster than before, across the world. His remarks caused knee-jerk reactions in the economies of many countries.
Technical forecast
US dollar/Japanese yen bounced off 109 lows last week and settled at 110.24 on Friday. The trend might attempt 111 high before encountering selling pressure. The overall range is expected from 109.50 to 111. Traders are reminded to be cautious in risk control.
Euro/US dollar fell beneath 1.18 on Friday as the dollar surged after positive job reports. We forecast the trend could trade in a narrow range with support emerging at 1.17. Topside resistance will likely be at 1.1850 in case of a recovery. The dollar will be main catalyst for influencing the euro in August.
British pound/US dollar traded in a small range last week but exhibited bearish pattern on Friday. We foresee the trend could be resisted at 1.3920 but prone to fall. The downside potential might be at 1.37. Traders are reminded to be prudent.
WTI Crude prices dived beneath US$72 per barrel last week and closed below US$70 per barrel on Friday. We expect market prices to weaken due to the stronger dollar. The overall range is expected to be contained from US$65 to US$70 per barrel in mixed trading sentiments.
Crude Palm Oil (FCPO) Futures on Bursa Derivatives recovered moderately last week. The market still faces a shortage in supply due to the pandemic crisis. October Futures contract settled at RM4,283 per metric tonne on Friday. The market might edge higher while approaching the roll-over period. The range is expected at RM4,200 to RM4,400 per metric tonne. Traders are reminded to control risk in case of falling beneath RM4,200 per metric tonne.
Gold prices dropped on Friday after stronger job reports. The market fell beneath US$1,800 per ounce and settled at US$1,762 per ounce. We reckoned the trend could be supported at US$1,750 per ounce but temporarily limited to US$1,780 per ounce. Beware of falling beneath US$1,750 per ounce.
Silver prices fell beneath US$25 per ounce, following the gold market’s bearish trend. The bears might be heading down to US$23.70 per ounce. Topside resistance could emerge at US$25 per ounce. In our opinion, traders will make some adjustment in the coming weeks before getting ready for the next bounce. Gold is expected to remain as the main leading factor for the silver market’s trend.
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.